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TS 
155 

"41 — Materials  and 
supplies. 


Southern  Branch 
of  the 

University  of  California 

Los  Angeles 

Form  L-l 

TS 

155 


This  book  is  DUE  on  last  date  stamped  below 


'JAN  I3T931 

f£B4    1949 
NOV  1  8  185ft 


DEC  16  1959 


MATERIALS  and  supplies  today  are  handled  in  such  quantities  that  every  detail  is  lifted  into 
' VI  importance.  The  tendency  to  refine  quality  by  exact  chemical  tests  is  indicated  by  the  Pierce- 
Arrow  laboratory,  and  the  tendency  to  arrange  deliveries  so  that  material  can  flow  into  production 
almost  without  pause  by  the  Ford  method  of  receiving  and  handling  small  parts  in  standardized  boxes 


SHAW  FACTORY  MANAGEMENT  SERIES 

MATERIALS  AND 
SUPPLIES 


PURCHASING  METHODS— STANDARDIZING  YOUR 

MATERIALS— STORES  KEEPING— STOCK 

RECORDS— INVENTORIES 


A.  W.  SHAW  COMPANY 

CHICAGO  NEW  YORK 

LONDON 

1921 


THE  SERIES:  BUILDINGS  AND  UPKEEP;  MACHINERY 
AND  EQUIPMENT;  MATERIALS  AND  SUPPLIES;  LABOR; 
OPWION  AND  COSTS;  EXECUTIVE  CONTROL. 


Copyright  1915,  by 

A.  W.  SHAW  COMPANY 

Entered  at  Stationers'  Hall,  London 

HUNTED  IN  THE  UNITED  STATES  OF  AMEBIC* 


TS 
\  55 


M  + 


CONTENTS 


I— PURCHASING  METHODS 

Chapter  Page 

I    BUYING  BY  THE  PROFIT  TEST 11 

Finding  the  final  cost  (11) — How  managers  calculate  savings 
by  capitalizing  the  economies  (12) — When  equipment  may 
profitably  be  increased  in  proportion  to  the  force  (13) — How 
the  United  States  Government  balances  final  economy 
against  first  cost  (15) 


II    KEEPING  IN  TOUCH  WITH  THE  MARKET    ...        17 

C  Developing  sources  of  supply  for  quick  delivery  (17) — Find- 

s  ing  the  plant  to  handle  the  exceptional  job  (18) — How  one 

purchasing  agent  organized  his  sales  literature  (22) — Learning 

the  trade  customs  (25) 

Si         III    SUPPLYING  THE  FACTORY'S  ROUTINE  NEEDS    .        .        26 

r  Continuous  purchasing  of  raw  materials  enables  the  buyer  to    • 

J  build  on  experience  (26) — How  standardization  gives  oppor- 

tunity for  economies  (27) — Four  ways  of  purchasing  for 
routine  needs  (33) 

IV    SPECIAL  PURCHASES 36 

J  Buying  on  a  service-proved-by-test  basis  (40) — How  to  place 

orders  in  an  unknown  and  limited  market  (40) — Getting  in 
touch  with  supply  sources  for  special  needs  (41) — How  Edison 
purchased  under  emergency  conditions  (43) 

V    DECIDING  WHETHER  TO  BUY  OR  MAKE     ...        45 

When  to  purchase  minor  parts  outside  at  a  price  higher  than 
the  factory's  cost  (45) — Why  home  manufacture  may  be  ad- 
visable (47) — How  buying  may  build  up  your  competitor  (48) 
— Does  it  ever  pay  to  manufacture  an  article  at  a  loss?  (51) 

VI    HOW  PRICE  AND  SERVICE  ARE  SECURED    ...        53 

Analyzing  the  supplier's  attitude  (53) — How  one  manager 
dealt  with  competitive  prices  (54) — Keeping  purchases  on  a 
merit  basis  (57) — Developing  a  proprietary  source  (59) 

VII    RECEIVING  AND  INSPECTING  PURCHASES  ...        65 
How  to  provide  for  incoming  shipments  (65) — Keeping  tab 
on  deliveries  (66) — Checking  in  purchases  by  departments  (67) 
— Making  reports  on  goods  when  they  enter  the  plant  (68) 


CONTENTS 


VIII    PURCHASE  FORMS  AND  SYSTEMS  ....        72 

How  a  definite  policy  for  handling  requisitions  prevents  losses 
and  controls  waste  (76)— When  committee  purchasing 
pays  (78) — Handling  purchasing  details  with  a  minimum  of 
clerical  labor  (78)— How  to  check  invoices  and  receipts  in  the 
purchasing  department  (81)— Recording  purchases  in  the 
small  concern  (83) 


II— SETTING  UP  MATERIAL 
STANDARDS 

DC    ELIMINATING  GUESSWORK  IN  BUYING        ...        89 

Protecting  quality  by  purchasing  to  specification  (89) — Where 
specifications  originate  (94) — Giving  the  supplier  a  definite 
idea  of  factory  needs  (95) — How  to  prevent  adulteration  or 
substitution  (96) — When  to  purchase  on  the  strength  of  the 
supplier's  reputation  (97) 

X    PROVING  MATERIALS  IN  THE  FACTORY      ...         99 

Making  the  shop  a  laboratory  for  studying  materials  (99) — 
Submitting  material  to  a  service  test  (100) — Checking  service 
tests  by  the  laboratory  (101) — When  shop  tests  are  the  only 
means  for  insuring  quality  (102) — Testing  for  quality  with 
inexpensive  equipment  (103) — How  one  concern  protects  it- 
self by  unique  tests  (104) 

XI    OUTSIDE  HELPS  IN  SETTING  STANDARDS   ...       107 

How  the  manufacturer  profits  by  the  experience  of  the  con- 
sumer (107) — Working  out  a  comparative  complaint  chart 
(108) — Cooperating  with  the  specialist  (111) — How  the  gov- 
ernment, educational  institutions,  and  associations  advance 
factory  practice  (115) 

XII    HOW  TO  DRAW  SPECD7ICATIONS 119 

What  the  specification  should  contain  (119) — Knowledge  of 
the  various  sources  prerequisite  (120) — Prescribing  the  sam- 
pling (126) — Twenty-four  standard  rules  for  drawing  sound 
specifications  (129) 

III— STOREKEEPING 

XIII  CONTROLLING  STORES  LIKE  CASH        ....       135 

Losses  due  to  lax  control  of  supplies  and  materials  (135) — 
Centralization  essential  in  storekeeping  (137) — Working 
out  an  adequate  system  for  the  small  factory  (138)— 
How  office  records  are  used  for  checking  the  storekeeper  (138) 
— Holding  the  workmen  to  strict  economy  (142) 

XIV  HOW  TO  IDENTIFY  AND  INDEX  STORES      ...       144 

Does  the  classification  of  stores  pay?  (144)— Requisites  for 
a  good  indexing  system  (147)— The  mnemonic  system  (147) 
—The  numerical  system  (149)— Physical  arrangement  of 
the  storeroom  (151) 


CONTENTS 


XV    WHERE  TO  LOCATE  THE  STOREROOM  ....       154 

Why  many  storerooms  are  located  haphazard  (154) — How 
manufacturers  find  the  strategic  position  for  raw  materials 
and  finished  goods  (155) — Plans  that  make  the  badly  placed 
storeroom  more  efficient  (157) 

XVI    DELIVERY  METHODS  THAT  EXPEDITE  WORK     .         .       160 

Meeting  routine  needs  by  setting  standards  of  consumption 
for  each  department  (160) — Securing  flexibility  in  the 
delivery  system  (161) — How  manufacturers  link  the  supply 
room  with  the  workmen  to  prevent  loss  of  time  of  employee 
or  machine  (162) 

XVII    HOW  MUCH  STOCK  TO  KEEP  ON  HAND  .         .       171 

Regulating  the  amount  of  inactive  stock  (171) — Why  a  stock 
specification  is  desirable  (172) — Determining  the  manufac- 
turing quantities  (174) — How  to  prevent  overstock  (177) — 
How  one  manufacturer  solved  this  problem  by  making 
finished  units  for  stock  (179) 

XVIII    FORMS  AND  SYSTEMS  FOR  STOREKEEPING  .         .       184 

Storekeeping  principles  for  large  and  small  factories  (184) — 
Keeping  track  of  materials,  supplies  and  tools  by  depart- 
ments (186) — How  to  handle  for  orders  for  special  tools  and 
fixtures  (190) — Classifying  the  duties  of  the  storekeeper  and 
stock  clerk  (192) 

XIX    HOW  INVENTORIES  ARE  HANDLED  IN  TEN  PLANTS  .       198 

Taking  the  inventory  in  minimum  time  (198) — Holding  each 
foreman  responsible  for  his  department  (201) — How  to  list 
obsolete  material  (203) — How  the  Chalmers  Motor  Company 
handles  inventory  in  one  day  (207) — Keeping  perpetual  in- 
ventories  (210) — Making  inventory  valuations  (211) 


PLATES 

Passing  of  the  Rule  of  Thumb  in  Handling  Materials       .         .  Frontispiece 

Winning  the  Cooperation  of  Salesmen    .......         19 

How  to  Keep  Purchase  Records 19,  38,  91 

Getting  a  Perspective  on  Items  and  Sources  ......         20 

How  to  Handle  In-Shipments 73,  74 

Testing  for  Quality 92,  109, 110,  127,  129 

Storage  Methods  Which  Cut  Costs  37,  38,  55,  56,  74,  145,  146,  163,  164,  199 

Identifying  Stores 56,164,181,199 

Delivery  Methods  Which  Facilitate  Production     .         .         .         .      87,  38,  182 

Keeping  a  Record  of  Stores 164,  800 

Well  Arranged  Tool  Departments 181,199,200 


FORMS 

I  Checking  against  an  Overstock  of  Material    . 

II  Listing  the  Materials  for  One  Machine 

III-V  Card  Index  Records  for  Every  Item  Purchased 

VI-VII  Short-cut  Records  for  Incoming  Shipments    . 

VIII-IX  Recording  Quotations  on  Staple  and  Special  Articles 


31 
31 
61 
67,69 
75 


8 


CONTENTS 


X-XI  Requisition  and  Purchase  Order  Forms 

XII-XIII  Receiving  Notice  and  Order  Record 

XIV  An  Invoice  Register  for  the  Purchasing  Department 

XV  Perpetual  Inventory  Record  for  Each  Class  of  Material 

XVI  Scoring  Service  on  a  Quotation  Card     . 

XVII-XVIII  Keeping  Records  without  a  Stock  Clerk 

XIX-XXI  Standardizing  Purchasing  Forms  . 

XXII-XXIII  Reporting  on  Tests  of  Materials  or  Supplies 

XXIV  Uncovering  Economies  by  Service  Tests 

XXV  How  the  Government  Handles  Specifications 

XXVI-XXVIII  Cutting  Down  Routine  in  Buying 

XXIX  A  Record  that  Indicates  When  to  Order 

XXX  Filing  Suppliers'  Quotations 

XXXI  How  Executives  Approve  Specifications 

XXXII  A  Final  Check  on  the  Cost  of  New  Work       . 

XXXIII  Getting  a  Finished  Stock  Estimate 

XXXrV  An  Assembly  Chart  for  Machine  Parts 

XXXV  Estimating  Available  Stock 

XXXVI  Watching  Every  Stock  Account    . 

XXXVII  Accounting  for  Receipts  and  Withdrawals     . 

XXXVIH-XL  A  Three-Form  Record  System  for  Raw  Materials 

XLI  Simplifying  the  Stores  Requisition 

XLII  Keeping  a  Daily  Inventory  on  Material 

XLIII  How  to  Handle  the  Requisition  for  Special  Stock 

XLIV  Weekly  Reports  on  the  Consumption  of  Supplies 

XLV  Card  Records  of  Stores  Carried  in  Stock 

XLVI-XLVIII  Checking  on  the  Deliveries  to  the  Storeroom 

XLIX  How  to  Watch  Shortages  Every  Week 

L  Teaching  the  Correct  Use  of  an  Inventory  Tag 

LI-LIV  How  Four  Forms  Reduce  Inventory  Work    . 

LV-LVI  Taking  Inventory  in  One  Day 

LVII-LIX  Classifying  and  Checking  Materials  and  Product 


76 
77 
79 
79 
79 
82,83 
84 
93,95 
103 
121 
139 
141 
141 
173 
173 
175 
175 
175 
175 
177 
186 
187 
189 
189 


191 
195 
201 
203 
205 
211 


FIGURES 

I  How  the  Purchasing  Agent  Keeps  Up  with  His  Markets         .         .  23 

n  Finding  the  Right  Time  to  Buy 28 

III  How  Much  to  Buy  at  Once 29 

IV  Adjusting  the  Terms  of  Purchase  to  Market  Conditions         .         .  30 
V  How  to  Purchase  for  Routine  Needs 33 

VI  Buying  under  Emergency  Conditions 43 

VII  Special  Factors  in  the  Problem  of  Whether  to  Buy  or  Make  .         .  47 

VIII  Storing  Data  for  Specifications 123 

IX  Eleven  Ways  to  Link  Supply  Room  with  Workmen       .         .         .165 

X  A  Blueprint  Plan  for  Taking  Inventory 204 


Part  I 


PURCHASING  METHODS 


AUTHORITIES  AND  SOURCES 
FOR  PART  I 


Chapter  I.  D.  R.  Swinton,  mechanical  engineer,  of  the 
Tuthill  Spring  Company,  H.  M.  Wilcox,  formerly  of  Miller,  Frank- 
lin &  Company,  and  Mr.  Porter  contributed  this  chapter.  It  is 
based  upon  a  study  of  purchasing  methods  in  the  Kohler  Com- 
pany, the  Bureau  of  Docks  and  Yards  of  the  United  States  Navy 
Department,  a  textile  mill,  machine  shop,  and  other  plants. 

Chapter  II.  Contributed  by  Johnson  Heywood,  former 
assistant  in  purchasing  with  Stone  and  Webster,  and  Mr.  Porter. 

Chapter  III.  Contributed  by  Mr.  Rockwell  and  Mr.  Porter' 
who  have  drawn  on  the  experience  of  Miller,  Franklin  &  Com- 
pany, efficiency  engineers;  Irving  A.  Berndt,  head  of  the  better- 
ment department  of  Joseph  T.  Ryerson  &  Son,  F.  A.  Marsh, 
purchasing  agent,  Link-Belt  Company,  A.  B.  Farquhar  Com- 
pany, a  Brockton  shoe  manufactory,  a  New  York  paint 
company,  and  others. 

Chapter  IV.  Written  by  Mr.  Porter.  The  plants  from  which 
the  instances  cited  are  drawn  are  the  Lamberson  Japanning  Com- 
pany, A.  B.  Farquhar  Company,  Edison  Storage  Battery  Com- 
pany, a  Connecticut  brass  company,  and  a  printing  company. 

Chapter  V.  Contributed  by  Ford  W.  Harris,  consulting  en- 
gineer, formerly  with  the  Westinghouse  Electric  and  Manufac- 
turing Company,  and  Mr.  Porter.  The  specific  lines  of 
manufacture  referred  to  are  household  utensils,  hardware, 
umbrellas,  electrical  devices,  engines,  chains  and  automobiles. 

Chapter  VI.  Contributed  by  George  H.  Cushing,  of  the 
Black  Diamond  Publishing  Company,  and  Johnson  Heywood,  in 
collaboration  with  Mr.  Porter.  The  chapter  presents  the  pur- 
chasing methods  of  the  Commonwealth  Edison  Company,  A. 
B.  Farquhar  Company,  an  ore-boat  line,  and  other  concerns. 

Chapter  VII.  Contributed  by  Sterling  H.  Bunnell,  works 
manager,  Griscom-Russell  Company;  Chas.  W.  Bane,  and  J. 
W.  Wiley,  assistant  secretary.  The  Meyercord  Company. 

Chapter  VIII.  This  study  of  purchase  forms  and  systems  is 
drawn  from  the  experience  of  Mr.  Porter;  J.  V.  Hunter,  mechani- 
cal engineer;  A.  J.  Borget,  Velie  Motor  Vehicle  Company; 
N.  Cannon,  purchasing  superintendent,  Joseph  &  Feiss  Com- 
pany, and  W.  J.  Miskella,  president,  Lamberson  Japanning 
Company.    Written  by  Mr.  Porter. 


I 


BUYING  BY  THE  PROFIT 
TEST 


SOUND  buying  for  any  of  the  factory's  needs — construction, 
equipment,  material,  supplies — means,  except  in  a  few 
emergencies,  buying  what  will  return  the  greatest  permanent 
profit.  Purchasing  as  well  as  production  is  only  a  step  towards 
the  factory's  final  goal  of  dividends.  But  to  buy  into  profits 
demands  foresight;  good  purchasing  calls  for  the  ability  to  cal- 
culate ahead  and  anticipate  savings  or  advantages  from  invest- 
ments not  yet  made.  Before  a  contract  is  signed  covering  the 
raw  material  for  many  months  ahead,  the  purchasing  agent  and 
those  working  with  him  must  determine  what  material  gives  the 
most  suitable  product  with  the  least  outlay.  To  do  so  involves 
not  only  comparative  tests  of  greater  or  less  intricacy,  but  also 
difficult  estimates  of  future  direct  and  indirect  charges. 

Comparative  figures  were  recently  made  on  the  cost  of  a  wood 
constructed  factory  with  engine  drive,  as  against  a  fireproof 
construction,  with  electric  drive  and  automatic  sprinkler  protec- 
tion. The  cost  of  the  former,  including  all  machinery,  was 
$28,000,  as  against  $38,300  for  the  latter.  The  difference  in 
insurance  premiums,  however,  amounted  to  more  tha^i  two 
thousand  dollars  per  year  in  favor  of  the  more  expensive  plant. 

This  saving,  it  is  seen,' is  almost  a  twenty  per  cent  dividend 
upon  the  difference  in  cost.  Thus,  without  taking  into  considera- 
tion numerous  other  economies  which  the  higher  class  structure 
is  certain  to  give — such  as  less  maintenance  expense,  less  wear 
and  tear  on  equipment,  reduced  depreciation  charges  on  both 
buildings  and  machinery,  a  higher  marketable  value,  the  attrac- 
tion and  holding  of  a  better  grade  of  help,  better  sanitation,  less 


19 PURCHASING   METHODS 

cost  to  heat— the  more  expensive  building  was  amply  justified. 

And  so  it  is  in  many  instances.  Capitalizing  the  real 
economies  shows  the  higher  priced  article — be  it  a  building,  a 
piece  of  equipment,  a  system  of  heating  and  ventilating,  a  paint 
for  interior  use,  metal  window  frames  and  sashes  and  factory 
ribbed  glass,  permanent  roof  covering,  power  units,  fuel,  supplies, 
raw  materials  of  manufacture,  or  what  not — to  be  actually  the 
cheaper,  though  the  first  cost  be  ten,  twenty  or  even  fifty  per 
cent  greater.  "The  best  is  the  cheapest  in  the  end"  almost 
invariably;  and  a  shrewd  mathematical  forecast  will  usually 
prove  the  rule. 

Those  manufacturers  who  have  shown  themselves  most  progres- 
sive do  not  spend  their  money  on  high-class  construction,  equip- 
ment and  stock  for  the  love  of  spending  it  or  because  their  innate 
sense  of  the  artistic  compels  them  to.  It  is  a  case  of  matter-of- 
fact  utility,  prospects  of  greater  actual  returns  on  their  money, 
pure  and  simple.  Every  manufacturer  will  recall  how  a  grade 
of  steel,  of  lumber,  of  oil,  of  varnish,  cost  more  but  saved  double 
that  excess  when  it  came  to  actual  use. 

Take  window  construction.  Manufacturers  have  come  to 
realize  that  metal. frames  with  ribbed  glass  pay,  regardless  of 
the  requirements  of  the  fire-insurance  companies.  These  should 
be  provided  throughout,  even  though  the  purposes  of  fire-protec- 
tion do  not  so  require.  The  practice  formerly  was  to  put  metal 
frames  and  sashes  only  where  absolutely  required  and  wooden 
frames  and  sashes  elsewhere. 

Regarding  the  actual  economy  of  the  metal  frames  and  sashes, 
a  manager  who  recently  completed  a  new  plant  thus  fitted 
throughout,  commenting  upon  the  comparatively  small  amount 
of  heat  required  in  his  new  factory,  states : 

"We  attribute  this  result  largely  to  the  use  of  metal  sash, 
properly  grouted  into  the  walls,  thus  making  them  absolutely 
air-tight  and  heat  leak-proof.  Our  experience  leads  us  to  believe 
that  we  may  safely  figure  the  exposure  of  metal  sash  properly 
grouted  into  the  wall  at  the  same  ratio  as  solid  brick  walls. 

"Ordinary  brick  is  quite  porous.  Window  glass,  on  the  other 
hand,  is  non-porous,  so  that,  while  it  may  offer  greater  radiating 
surface,  the  outside  wind  pressure  cannot  penetrate  and  the 
leakage  is  nil.    At  any  rate,  be  that  as  it  may,  the  fact  remains 


BUYING  FOR  PROFIT 13 

that  we  are  heating  our  building  with  less  than  half  the  theoret- 
ical amount  of  radiation,  based  on  tests  made  with  wooden  sash. 
It  seems  fair  to  assume,  therefore,  that  it  requires  more  radiation 
to  overcome  the  leakage  around  the  ordinary  wooden  sash  than 
it  does  to  take  care  of  the  glass  exposure." 

This  manager  found  that,  capitalizing  the  savings  in  fuel  con- 
sumption for  heating  purposes  alone,  he  was  more  than  justified 
in  using  metal  frames  instead  of  wood.  For  every  dollar  saved 
on  the  coal  bill  he  could  afford  to  invest  sixteen  dollars  and 
sixty-seven  cents  in  permanent  improvements,  one  dollar  being 
the  interest  at  six  per  cent  on  $16.67.  So  if  he  saved  only  one 
hundred  dollars  on  his  fuel,  he  would  be  justified  in  outlaying 
$1,667  more  for  steel  windows  than  for  wood.  The  numerous 
other  advantages — more  light,  greater  durability,  less  mainte- 
nance cost,  better  fire  protection,  hence  decreased  insurance 
premiums,  if  also  capitalized,  would  swing  the  balance  very  heav- 
ily in  favor  of  the  more  expensive  article.  In  addition  there  is 
the  saving  on  the  investment  in  heating  equipment  and  the  re- 
duced operating  expenses,  another  clear  gain  in  favor  of  the  steel 
frames.  Thus  questions  of  construction  and  equipment  purchas- 
ing need  to  be  solved  in  connection  with  the  larger  items  of 
materials  and  supplies. 

REAL  ECONOMIES  FREQUENTLY  JUSTIFY 
GREATER  FIRST  COST 

CIMILAR  considerations  go  into  every  decision  to  purchase  for 
the  factory.  Take  prismatic  glass.  Though  more  costly 
than  plain  glass,  it  is,  properly  set,  much  superior.  Plac- 
ing the  ribs  outside  catches  the  rays  of  light,  diffuses  them  and 
throws  the  light  into  the  room  without  shadow.  With  plain 
glass  there  is  no  diffusion ;  the  light  passes  through  and  strikes 
the  floors  and  walls  with  a  blinding  glare.  Shadows  are  always 
prevalent  and  the  light  in  general  is  not  to  be  compared  to  the 
soft,  penetrating  and  shadowless  light  of  the  prism  glass.  Real 
economy  again  appears,  based  on  greater  first  cost. 

Sometimes  the  line  of  economy  takes  the  direction  of  increasing 
equipment  in  proportion  to  the  manning.  This  instance  of  an 
automatic   grinder  is   typical.    Both   roughing   grinding   and 


14 PURCHASING   METHODS ..     .  . 

finishing  grinding  were  being  done  on  one  machine.  The  method 
was  to  run  a  lot  through  the  roughing  process;  then  reset  the 
machine  and  run  the  same  lot  through  a  second  time.  A  time- 
study  disclosed  much  lost  time.  So  a  different  arrangement, 
based  on  the  use  of  two  machines,  both  tended  by  the  one  opera- 
tor, one  to  work  exclusively  on  the  roughing  grinding  and  the 
other  on  the  finishing  grinding,  was  worked  out.  Analysis 
showed  that  a  saving  of  forty-four  and  one-half  per  cent  in  the 
time  per  piece  could  thereby  be  effected.  But  would  this  increase 
in  the  output  be  sufficient  to  bring  justifiable  returns  on  the 
investment  in  one  additional  machine?  Also  what  percentage 
of  time  would  the  machines  be  idle  between  the  time  the  grinding 
is  automatically  completed  and  the  operator  gets  the  machine 
started  again? 

It  was  found  that  it  took  the  man  0.33  minutes  to  complete 
his  round  of  motions  from  the  time  the  machine  was  started  until 
he  returned  to  unload  and  load  it  again.  The  automatic  part  of 
the  operation  took  0.30  minutes.  Thus,  with  two  machines,  0.03 
minutes  would  be  lost  on  each  machine  on  each  operation  of 
grinding.  Hence  the  machine  efficiency  would  be  ninety-one 
per  cent  as  compared  with  the  old  method. 

It  was  assumed  that  there  would  be  enough  work  to  keep  two 
machines  busy.  The  cost  of  a  machine  was  about  two  hundred 
and  fifty  dollars.  It  was  estimated  that  twenty  per  cent  would 
cover  the  yearly  charge  for  interest,  depreciation  and  repairs. 
The  operation  charge  per  machine  per  year  figured  out  fifty 
dollars. 

A  twenty-cent-per-hour  man  was  doing  this  work.  Thus,  the 
expense  of  the  man  per  year,  working  full  time,  would  be  $572.00. 
Deducting  twenty  per  cent  from  this  to  cover  non-productive 
time,  that  is,  time  spent  on  set-ups,  adjusting  machines,  "rest," 
personal  needs,  and  so  on,  and  taking  forty-four  and  one-half 
per  cent  of  the  balance,  the  saving  in  labor  by  the  new  method 
figured  $210.00  per  year.  Against  this  was  a  charge  of  fifty 
dollars  for  the  additional  machine,  leaving  a  net  saving  of  $160.00 
per  year,  which  is  the  interest  on  $2,667.00  at  six  per  cent. 

When  the  wisdom  of  making  a  purchase  of  new  equipment, 
or,  for  that  matter,  any  item  entering  into  manufacturing  from 
the  "roof  over  the  processes"  on  down  to  the  ore,  leather,  wood, 


BUYING  FOR  PROFIT 15 

clay  and  glue,  or  the  brushes  used  to  paint  the  product,  is 
figured  out  in  this  way,  when  in  each  instance  the  economies  are 
capitalized,  purchasing  is  put  on  a  true  scientific  basis.  Senti- 
ment, prejudice,  favoritism,  circumscribed  vision,  ultra-conserva- 
tism, snap- judgments,  lowest  first  cost — in  fact,  all  the  "bogies" 
of  unscientific  buying,  are  automatically  ruled  out  when  the 
wisdom  of  purchases  is  so  tested. 

This  is  the  method  very  generally  followed  by  the  Government. 
In  the  Bureau  of  Docks  and  Yards  of  the  United  States  Navy  De- 
partment, for  instance,  before  any  purchases  of  new  machinery 
are  made,  the  difference  in  original  cost  is  balanced  against 
the  difference  in  economy  guaranteed  by  each  bidder.  If  in  the 
market  for  steam  machinery,  for  instance,  the  Bureau  requires  the 
bidders  to  guarantee  the  steam  consumption  of  the  several  outfits 
proposed,  and  assuming  ostensible  values  for  the  cost  of  fuel 
and  rate  at  which  it  will  evaporate  water  in  the  boilers,  they 
calculate  the  probable  saving  in  fuel  per  year.  The  differ- 
ence in  cost  of  fuel  is  taken  as  an  annuity  for  a  term  of  years 
conservatively  estimated  to  represent  the  life  of  the  machinery, 
and  the  present  worth  of  this  annuity  is  then  used  for  comparing 
bids. 

It  is  merely  a  matter  of  arithmetic  to  show  that  the  payment 
of  one  dollar  a  year  for  fifteen  years  would  be  equivalent  to  a 
capital  in  hand  of  $9.71,  if  that  capital  were  earning  interest  at 
six  per  cent,  compounded  annually. 

Hence,  it  is  assuredly  justifiable  to  spend  $9,710  for  an  outfit 
that  will  save  $1,000  a  year  for  fifteen  years,  capital  valued  as 
above.  Almost  invariably,  too,  the  equipment  designed  for  most 
economical  operation  would  be  the  most  smoothly  running  and 
in  every  way  the  most  reliable  outfit. 

Similarly,  small  differences  in  the  operation  of  an  outfit,  in  a 
plant  of  any  size,  will  on  occasion  show  even  greater  savings  in 
favor  of  one  or  another  of  the  outfits  tendered. 

The  makers  are  required,  according  to  the  specifications  of  the 
Bureau  of  Docks  and  Yards,  to  guarantee  the  saving  claimed, 
and  if  on  test  the  plant  shows  a  less  saving,  an  amount  equivalent 
to  the  shortage,  calculated  on  the  basis  of  an  annuity  as  explained, 
is  withheld.  This  arrangement  makes  the  bidders  extremely 
careful  not  to  overstate  the  case  in  favor  of  their  own  equipment. 


16 PURCHASING   METHODS 

How  the  government  handles  these  matters  contains  sug- 
gestions for  the  manufacturer.  He  cannot  perhaps  apply  the 
method  in  exact  detail  to  all  his  purchases,  but  it  would  seem 
that  he  could  adopt  it  with  regard  to  competing  sources  of  raw 
materials  and  standard  equipment,  which  represent  so  large  a 
money  outlay,  in  view  of  the  wide  range  of  choice  offered  and 
the  keen  competition  among  rival  suppliers. 

Or,  the  problem  may  be  whether  to  buy  his  power  of  a  central 
station,  or  make  it  himself.  Sentiment  or  trivial  considerations 
should  not  lead  him  into  making  the  wrong  move.  It  is  per- 
fectly possible  to  reduce  the  matter  to  a  cold  business  proposi- 
tion. Sometimes  it  works  out  to  the  advantage  of  the  central 
station ;  other  times,  when  offhand  the  advantage  seems  to  lie  in 
that  direction,  capitalizing  the  relative  economies  will  show  the 
advantage  to  be  precisely  the  reverse. 

So,  in  the  matter  of  every  large  purchase,  and  especially  those 
materials  and  supplies  which  figure  large  month  after  month, 
tests  and  figures  should  decide.  The  manager  should  insist  on 
estimates  being  worked  up  for  the  various  competing  items,  and 
so  learn  their  respective  merits  unbiased  by  the  enthusiasm  of 
the  moment.  If  the  calculations  have  been  made  properly,  the 
best  course  to  pursue  in  purchasing  will  be  evident 


II 


KEEPING  IN  TOUCH  WITH 
THE  MARKET 


ONE  week  the  purchasing  agent  for  a  Chicago  factory  nodded 
a  deferential  salesman  his  routine  order  for  a  thousand 
pounds  of  solder;  the  next  he  crowded  into  a  market 
flanked  with  sales  managers  directed  to  discourage  heavy  buying, 
and  at  the  earliest  moment  pledged  various  suppliers  to  contracts 
for  ten  tons.    "War  had  been  declared  in  Europe. 

To  purchase  well  in  and  out  of  season  calls  for  the  foresight, 
enterprise  and  thorough  knowledge  of  markets  which  enable  the 
buyer  to  save  his  concern  in  no  matter  what  crisis  among  prices 
and  deliveries.  The  morning  newspaper  needs  to  speak  to  the 
purchasing  agent  in  terms  of  his  supply  sources  throughout  the 
world.  His  insurance  against  high  prices,  poor  quality  and 
shortage  is  always  to  keep  the  entire  field  of  sources  available. 

Thus  to  study  the  strategy  of  your  markets  merely  requires 
energy  and  method.  It  is  easy  to  obtain  a  list  of  concerns 
handling  any  particular  product  in  any  given  territory.  In  the 
course  of  several  years'  experience  with  them,  a  buyer  can 
eliminate  the  unreliable  concerns  and  get  a  good  line  on  the 
ability  of  each  to  make  deliveries.  This  is  slow  work,  however, 
and  not  so  conclusive  as  other  and  quicker  methods. 

Surprisingly  often  a  purchasing  agent  will  overlook  a  concern 
literally  ' '  under  his  nose, ' '  which  is  able  to  make  quick  deliveries 
from  stock  on  material  which  he  has  always  bought  from  a  dis- 
tant source,  thereby  inviting  costly  delays.  Frequently,  too,  you 
can  find  manufacturing  plants  that  are  able  to  turn  out  products 
which  they  do  not  attempt  to  push  as  their  standard  lines. 

There  is  a  wonderful  chance  at  present  for  further  cooperation 


18 PURCHASING   METHODS 

in  America  along  this  line,  between  factories  which  might  give 
service  to  nearby  enterprises  and  purchasers  who  might  develop 
sources  close  at  home. 

Eecently  a  buyer  was  in  the  market  for  a  large  quantity  of  an 
assembled  product  consisting  of  drop  forgings,  bolts,  pins,  and 
so  on,  all  to  be  galvanized,  and  each  assembly  to  contain  about 
forty  pieces.  Inquiries  were  sent  to  all  recognized  manufac- 
turers in  this  line,  but  only  two  bids  were  received  and  these 
varied  widely.  As  a  last  resort,  the  inquiry  was  sent  to  a  machine 
shop  in  a  neighboring  city,  which  had  no  facilities  for  galvaniz- 
ing. This  shop  some  time  before  had  turned  out  several  thousand 
special  bolts  on  which  the  workmanship  and  delivery  had  been 
excellent.  When  its  bid  on  the  new  assembly  proved  slightly 
lower  than  those  received  from  the  other  bidders,  therefore,  it 
was  decided  to  award  this  shop  the  contract. 

The  owners  agreed  to  install  a  galvanizing  tank  inside  of  a 
month  and  asked  that  the  purchaser  provide  an  inspector  in  their 
plant  to  pass  upon  the  parts  in  process  and  the  finished  product. 
This  was  done  and  where  the  inspector  found  shop  conditions 
which  could  be  changed  to  the  end  of  obtaining  better  or  quicker 
work,  his  suggestions  were  gladly  accepted.  The  contract  was 
delivered  strictly  according  to  schedule,  the  workmanship  was  all 
that  could  be  asked  and  what  was  more,  the  manufacturer  made 
a  satisfactory  profit.  By  careful  investigation,  the  purchasing 
agent  often  finds  such  small  shops  which  are  in  a  good  position 
to  turn  out  special  work  beyond  their  line. 

Not  infrequently,  too,  he  will  find  some  small  shop  with  a  re- 
sourceful manager  who  will  undertake  exceptional  jobs  in  his 
line  with  which  the  big  fellows  will  not  bother.  A  large  steel 
mill  in  the  Chicago  district  was  about  to  refuse  a  large  order  for 
long  Tee-irons,  furnished  with  one  coat  of  japan  baked  on, 
because  it  had  not  the  facilities  for  this  kind  of  work  and  could 
not,  moreover,  locate  an  enameling  shop  which  was  willing  even 
to  bid  on  the  job.  As  a  last  resort,  the  purchasing  agent  called 
up  the  head  of  a  small  japanning  works,  only  a  short  time  in  the 
field,  but  which  already  had  come  to  his  favorable  attention. 
"Yes,  we  will  be  glad  to  bid  on  this  order,"  was  the  response, 
after  a  few  moments  of  calculation.  "I  shall  have  it  ready  for 
you  tomorrow.' ' 


Nothing  gains  the  cooperation  of  salesmen  like  a  reputation  for  discretion  on  the  part  of  the  purchasing 
agent.  The  office  shown  below  illustrates  how  the  purchasing  agent  keeps  other  affairs  out  of  the  way 
when  the  salesman  calls.  The  office  at  the  top  (Baker-Vawter  Company)  is  equipped  with  filing 
room  in  which  the  buyer's  records  are  always  at  hand,  but  confidential  quotations  are  given  privacy 


DEVELOPING   MARKETS 21 

True  to  his  word,  the  manager  of  the  japanning  company  sent 
in  his  bid  the  next  day  and  the  purchasing  agent  was  agreeably 
surprised  at  the  reasonableness  of  the  figure.  He  had  felt, 
owing  to  the  lack  of  competition,  that  he  would  be  held  up  for  a 
fancy  price.  He  was  in  some  doubt,  however,  of  his  bidder's 
ability  to  make  good.  When  the  latter  explained  his  method  for 
handling  the  order,  doubt  gave  way  to  admiration.  The  japan- 
ning man 's  scheme  was  this :  Realizing  the  impossibility  of  han- 
dling such  a  job  economically  in  the  city,  he  planned  to  put  up 
a  cheap  structure  in  the  country,  handy  to  a  switch,  where  he 
would  have  plenty  of  room  to  store  the  Tee-irons  and  have  no 
cartage  to  pay.  Then,  instead  of  building  an  ordinary  oven,  he 
proposed  to  construct  one  on  the  hood  principle,  which  could  be 
lowered  over  a  pile  of  irons.  The  steam  coils  he  would  place  in 
a  pit  beneath.  Another  pit  nearby  would  serve  for  dipping 
purposes.  The  operation  then  would  resolve  itself  into  dipping 
the  pieces  several  at  a  time,  stacking  them  up  on  an  open  plat- 
form truck  and  wheeling  the  truck  to  a  point  over  the  steam 
coils,  then  lowering  the  hood  and  turning  on  the  steam.  By 
the  time  the  one  charge  was  baked,  another  would  be  ready.  He 
had  his  costs  figured  out  in  detail  and  although  he  had  added  a 
liberal  margin  for  contingencies  and  profit,  his  price,  owing  to 
the  exceptional  economy  of  his  method  of  handling  the  work, 
was  remarkably  low. 

This  may  be  the  only  job  he  will  do  at  the  special  plant.  But 
the  order  is  large  enough  so  that  its  cost  will  be  completely 
absorbed.  The  chances  are,  however,  that  having  the  facilities 
he  will  get  many  more  such  jobs,  from  this  and  other  buyers,  for 
which  he  will  have  his  plant  free  of  investment  charges.  Thus 
it  is  that  persistent  and  broad-gaged  purchasing  agents  fortify 
themselves  for  special  requirements,  by  searching  out  small  shops 
which  can  be  developed  into  permanent  sources  of  supply. 

A  purchasing  agent  thoroughly  experienced  in  buying  factory 
supplies  on  the  Pacific  coast  recently  took  the  same  position  with 
a  construction  company  in  the  Middle  West.  His  ignorance  of 
many  of  the  tools  and  materials  and  his  unfamiliarity  with  the 
markets  staggered  him.  Before  buying  for  the  job  must  begin, 
he  had  a  margin  of  only  thirty  days  in  which  to  learn  his  markets. 


22 PURCHASING   METHODS _____ 

Campaign  plans  full  of  suggestions  for  any  purchasing  agent 
were  at  once  launched. 

His  first  step  was  to  secure  an  authentic  buyer's  directory,  the 
telephone  directories  of  all  large  nearby  cities  and  to  subscribe 
to  several  trade  papers,  the  leaders  in  the  fields  of  electricity, 
lumber,  iron  and  steel,  railway,  hardware  and  building.  Then, 
with  the  help  of  the  superintendent  of  construction,  a  compre- 
hensive list  of  materials  that  would  probably  be  used  was  drawn 
up.  With  this  list  and  the  buyer's  guide,  trade  papers  and 
telephone  directories  to  furnish  the  names,  letters  were  written 
advising  of  the  work  under  way  and  asking  for  catalogs.  This 
brought  a  flood  of  sales  literature,  all  of  which  was  carefully 
examined  by  the  purchasing  agent  personally. 

HOW  ONE  PURCHASING  AGENT  ORGANIZED 
HIS  SALES  LITERATURE 

CO  many  jobber  catalogs  were  found  to  be  identical,  that  all 
but  the  most  comprehensive  in  each  line  were  destroyed 
to  save  space.  Those  covering  similar  lines  of  material  were 
grouped,  indexed  according  to  the  firm  name  and  cross-indexed 
according  to  class  of  material.  A  list  of  jobbers  and  manufac- 
turers was  also  made  up,  classified  according  to  materials  handled 
or  produced.  This  was  known  as  the  inquiry  list  and  as  time 
went  on  other  names  were  added.  As  experience  showed  that  a 
concern  was  unreliable  or  undesirable,  its  name  was  dropped. 

A  small  army  of  salesmen  and  sales  managers  responded  to  the 
first  letters  sent  out,  in  addition  to  the  catalogs.  Every  one  who 
called  was  given  a  courteous  hearing  and  the  buyer  endeavored 
to  get  on  a  personal  basis  with  them  all.  He  realized  that  as  a 
purchasing  agent  he  would  hear  only  the  salesman's  talk  about 
his  line  and  the  firm,  but  as  "Bill  Jones"  he  would  get  "Tom 
Bobinson's"  real  feelings  and  intimate  knowledge  of  his  particu- 
lar line.  So  the  human  side  was  developed  and  each  salesman 
encouraged  to  talk. 

Next  a  trip  was  taken  to  neighboring  jobbing  centers,  after 
appointments  had  been  made  with  the  leading  houses  in  the  lines 
in  which  he  was  interested.  These  visits  were  made  primarily 
to  see  what  classes  of  materials  were  actually  stocked  and  how 
large  the  stocks  were,  and  secondarily,  to  become  acquainted 


DEVELOPING   MARKETS 


23 


with  the  heads  of  the  firms.  It  is  always  best  to  talk  to  a  man 
high  in  authority  when  bad  deliveries  or  a  break-down  calls  for 
the  use  of  the  long  distance  telephone. 

The  knowledge  the  buyer  gained  of  the  actual  stocks  carried 
by  jobbers  was  of  great  value  in  placing  orders  when  a  small 
quantity  of  material  was  needed  in  a  hurry.  He  also  visited 
various  manufacturing  plants  for  the  purpose  of  noting  the  exact 
kinds  of  work  which  they  were  prepared  to  do,  the  character  of 
the  equipment  and  the  apparent  ability  to  handle  large  contracts 
expeditiously.  Copious  notes  were  made  of  conditions  as  revealed 
on  these  trips  and  formed  part  of  the  buyer's  confidential  in- 
formation book.  Thus  a  good  general  knowledge  of  supply 
sources  was  obtained.  To  determine  the  most  satisfactory  houses 
with  which  to  deal,  it  only  remained  to  compare  prices  and 
qualities,  which  was  done  when  the  actual  buying  began. 

Upon  going  into  the  market  for  lumber,  the  wide  difference 
in  trade  customs  in  different  sections  of  the  country  was  forcibly 


Catalogs 
Trade  Journals 
Newspapers  and  Magazines 
Technical  and  Reference  Works 
Government  Reports 
Trade  Information  Bureaus 
Buyers'  Guides 

Salesmen  and  Agents 
Trade  Associations 
Commercial  and  Social  Clubs 
Conventions 

Samples 

Competitors'  Sales  Rooms 
Product  at  Factories 
Permanent  and  Special  Exhibits 

By  Reference  to 

How  the  Purchasing 
Agent  Keeps  Up 
with  His  Markets 

By  Inquiry  among 

By  Inspection  of 

FIGURE  I:  Three  methods  by  which  the_  buyer  keeps  in  touch  with  constantly  changing  markets 
are  here  charted.  Highest  efficiency  in  his  office  necessitates  an  accurate  ana  a  flexible  system 
under  which  he  can  file  for  instant  reference  the  information  gleaned  .from  catalogs  and  trade 
journals.  The  value  of  such  a  system  is  greater  if  it  contains  records  of  inquiries  among  salesmen, 
agents  and  other  sources,  as  well  as  reports  of  all  inspections  made  t>y  the  buyer 


brought  to  this  buyer's  attention.  His  experience  had  been  in 
the  northwest,  where  white  pine  and  fir  were  the  standards.  The 
rail  haul  from  mill  to  consumer  had  been  very  short  and  the 
price  of  rough  lumber  had  therefore  been  less  than  that  of 


24 PURCHASING  METHODS 

finished.  In  his  new  location,  yellow  pine  was  the  only  available 
wood,  and  there  was  a  long  rail  haul  from  the  southern  mills. 
It  astonished  him  to  find  that  finished  material  was  several  dol- 
lars cheaper  than  rough  because  the  decreased  weight  made  the 
freight  per  thousand  feet  much  less.  The  grades  and  qualities 
were  also  entirely  different  from  those  to  which  he  had  been 
accustomed. 

His  first  order  would  require  several  million  feet,  all  of  which 
would  have  to  be  delivered  within  ninety  days.  It  appeared 
impossible  for  him  to  get  any  accurate  information  in  the  short 
time  available  as  to  the  southern  lumber  manufacturers.  St. 
Louis,  one  of  the  largest  yellow-pine  markets,  was  within  easy 
distance  of  the  point  of  delivery,  however,  so  he  made  a  trip 
to  that  point,  and  submitted  specifications  to  a  half  dozen  brokers 
or  mill  representatives  and  also  to  four  or  five  large  lumber 
dealers  who  carried  heavy  stocks  in  their  yards.  Prices  for  mill 
shipments  from  both  classes  of  bidders  were  about  on  a  par,  so 
the  order  was  split  to  give  several  mills  each  a  part  of  it.  This 
not  only  prevented  one  mill  from  being  swamped,  but  also  in- 
sured the  purchaser  against  the  chance  of  accident,  flood  or 
strike  tying  up  his  shipments. 

In  addition,  all  the  orders  were  placed  through  concerns  which 
carried  stocks  in  St.  Louis.  This  was  a  wise  precaution,  for  the 
purchasing  agent  saw  that  he  would  need  at  various  times  carload 
lots  of  lumber  on  such  short  notice  that  they  would  have  to  be 
supplied  from  stock.  His  judgment  was  correct  and  when  his 
urgent  need  came,  he  found  the  yards  in  a  grateful  frame  of 
mind,  ready  to  do  everything  possible  to  get  his  requirements 
to  him  in  record  time;  and,  what  was  equally  to  the  point,  not 
to  take  advantage  in  the  matter  of  price. 


PROFITABLE  BUYING  DEMANDS  CLOSE  OBSERVATION 
OF  CONSTANTLY  CHANGING  MARKETS 


JN  getting  at  the  "where"  of  the  markets,  class  journals  and 
trade  papers  are  of  great  value ;  they  put  a  buyer  in  direct 
touch  with  the  manufacturer.  Most  manufacturers  of  high-grade 
products  realize  the  benefit  of  direct  contact  with  the  consumer 
and  know  that  the  surest  way  to  do  this  is  to  advertise  in  the 
proper  class  and  trade  organs.    Every  wide-awake  purchasing 


DEVELOPING  MARKETS 25 

agent  is  habitually  a  reader  of  the  advertisements  and  market 
reports  given  by  these  papers,  having  thus  a  perspective  on  price 
movements  from  the  viewpoint  of  the  industry  as  well  as  through 
the  general  and  special  quotations  of  the  individual  concerns 
with  which  he  has  listed  his  wants.  It  is  almost  a  rule,  indeed, 
that  the  amount  of  large  buying  a  man  does  through  a  jobber  is 
a  sure  index  of  how  lazy  he  is.  This  applies  to  large  plants  only 
and  is  not  to  be  construed  to  mean  that  the  jobbers  can  be  or 
should  be  eliminated.  On  the  contrary,  the  jobber  has  very 
real  functions  to  perform.  The  three  greatest  ones  are  to  supply 
stock  for  quick  delivery,  to  furnish  small  assortments  and  to 
handle  the  business  of  the  smaller  concerns  whose  individual 
orders  a  manufacturer  could  not  handle  profitably,  but  which, 
in  the  aggregate,  are  large. 

To  learn  all  the  trade  customs  in  various  lines,  there  is  no 
short  cut.  Careful  study  of  catalogs,  the  willingness  to  see 
and  learn  from  all  salesmen,  and  when  possible,  the  personal 
examination  of  material  for  the  sake  of  familiarizing  yourself 
with  it,  are  all  essential.  Some  purchasing  agents  do  not  seem 
to  realize  the  value  of  familiarity  with  the  details  of  trade  cus- 
toms and  by  that  failure,  fall  in  the  estimation  of  the  salesman. 
The  latter,  when  he  realizes  that  a  purchasing  agent  has  accurate 
knowledge  of  a  line,  is  put  on  his  mettle  and  freed  from  any 
temptation  to  take  unfair  advantage  (Figure  I). 

There  are,  of  course,  a  multitude  of  customs  which  must  be 
learned  if  one  wishes  to  purchase  rapidly  and  well — many  of 
them  apparently  arbitrary.  Why,  for  instance,  should  rubber 
insulated  wire  be  sold  by  the  foot,  while  weather-proof  wire  is 
priced  by  the  pound?  A  pound  is  the  unit  for  steel  or  iron 
wire,  but  a  foot  is  the  measure  for  wire  rope,  which,  by  the 
way,  is  one  of  the  few  standard  steel  products  that  is  not  governed 
by  the  pound  price.  The  movement  among  manufacturers  to 
standardize  list  prices  of  many  items  such  as  valves,  pipe  fittings 
and  tools  is  making  the  work  of  the  buyer  easier.  Only  a  small 
part  of  the  field  has  been  covered,  however,  and  until  this  work 
is  completed,  the  successful  purchasihg  agent  must  not  only  be 
a  keen  business  man,  but  in  addition  a  mental  encyclopedia 
covering  many  trades. 


Ill 

SUPPLYING  THE  FACTORY'S 
ROUTINE  NEEDS 


DOES  the  shop  receive  exactly  what  it  wants  without  delay 
and  without  the  creation  of  a  burden  of  carrying  charges, 
depreciation  and  obsolescence  on  an  unnecessarily  large 
lot  of  supplies  and  materials?  This  is  the  chief  problem  in 
supplying  the  everyday  needs  of  the  factory.  The  elimination 
of  items  and  qualities  that  prove  expensive,  of  high  prices,  of 
express  transportation  rates,  and  of  telegraphic  orders  for  rush 
deliveries  due  to  "shortages"  are  its  factors.  The  solution  lies 
in  knowing  your  sources,  your  specifications  and  requirements 
and  the  conditions  in  the  shop. 

Experience  tables  of  past  quotations,  prices  paid,  service  and 
quality  are  to  be  built  up  as  the  first  requisite.  They  enable  the 
buyer  to  tag  unreliable  concerns  and  inferior  material.  More- 
over, this  information  carefully  tabulated  and  filed  is  invaluable, 
if  the  purchasing  agent  is  changed.  Standardization  of  his 
experience  means  that  his  successor  can  steer  out  around  his 
once-paid-for  mistakes. 

To  buy  when  the  market  is  naturally  low  is  basic.  This  point 
may  to  advantage  be  visualized  graphically.  In  the  office  of  a 
New  York  buyer,  for  example,  the  market  prices  of  all  the  prod- 
ucts in  continuous  demand  by  the  factory  are  charted  for  the 
preceding  ten  years.  A  glance  at  the  chart  shows  that  the  price 
of  this  material  is,  as  a  rule,  lowest  in  August,  of  that  in  Novem- 
ber, and  so  on.  Close  study  of  market  conditions  and  the  bring- 
ing of  the  chart  down  to  date  weekly  have  given  this  purchasing 
agent  an  unusual  insight  into  price  trends  (Figure  II). 

On  the  other  hand  is  the  trend  of  demand.    The  purchasing 


ROUTINE  BUYING  27 


agent  must  have  his  similar  mechanism  for  foreseeing  the  wants 
of  the  organization  itself.  He  needs  to  be  intimately  familiar 
with  and  even  actually  a  part  of  the  operating  system.  Knowl- 
edge of  peculiar  needs  in  both  product  and  equipment  will 
scarcely  be  gained  in  any  other  way  (Figure  III). 

To  know  the  why  and  wherefore  behind  the  specification  means 
more  intelligent  buying.  Every  purchasing  agent  bargains  on 
the  basis  of  specifications  and,  in  the  course  of  supplying  stock 
needs,  these  become  standardized.  Quality  once  attained  is  per- 
manently assured.  The  buyer's  knowledge  of  what  raw  materials 
are  to  be  had,  with  qualities  and  costs  and  how  suppliers  stand 
on  deliveries  and  so  on,  needs  to  be  capitalized  and  included 
in  the  specification. 

Opportunities  for  large  economies  in  standardization  also 
await  the  live  purchasing  agent.  A  buyer  of  this  sort  in  a  New 
England  machine-builder's  plant,  within  a  month  after  replacing 
an  ' '  old  style ' '  purchasing  agent  who  spent  most  of  his  energies 
in  dickering  over  prices,  more  than  earned  his  salary  by  having 
the  bolts  and  screws  in  the  product  fixed  at  a  standard  size  and 
gage.  Similarly  a  purchaser  in  a  large  factory  in  the  Middle 
"West  standardized  the  oil.  Previously,  seven  different  kinds  of 
oil  were  used  in  the  various  departments,  due  to  the  prejudices 
of  the  men.  By  the  use  of  an  oil-testing  machine,  he  found  the 
one  best  oil.  The  resultant  saving  netted  several  thousand 
dollars  annually. 

In  another  instance,  some  forty-odd  different  kinds  of  files 
were  reduced  to  seven,  without  in  any  wise  inconveniencing  the 
shop.  A  much  smaller  stock  in  aggregate  was  thus  made  pos- 
sible, with  a  decrease  in  investment  and  in  storage  space  re- 
quired. Because,  too,  a  larger  quantity  of  each  style  and  size  of 
file  could  be  carried,  the  purchasing  agent  obtained  better  prices. 
The  saving  was  thus  two-fold. 

It  is  necessary  to  be  on  the  watch  constantly  for  new  ideas, 
new  materials  or  supplies  which  may  increase  production,  lower 
costs,  or  enhance  quality,  says  H.  A.  Russell,  of  the  buying 
staff  of  the  A.  B.  Farquhar  Company.  In  order  to  make  sure 
of  the  result,  however,  most  new  things  must  first  be  given  a 
thorough  tryout  in  the  factory.  Verbal  reports  seldom  are  suffi- 
cient and  may  lead  to  disputes  later  on.     Accordingly,  a  definite 


28 


PURCHASING    METHODS 


form  has  been  devised  (Form  XXIII)  for  getting  a  report  from 
the  foreman  in  whose  department  the  material  will  be  used. 
When  the  salesman  calls  again,  if  the  report  meanwhile  has  been 
returned,  it  is  shown  to  him.  This  indicates  where  the  material 
is  falling  short,  if  at  all,  and  why.  Whether  he  will  be  given 
an  order  depends  on  a  sample  which  will  receive  a  favorable 
report. 

Every  progressive  buyer,  in  fact,  today  takes  the  "show  me" 
attitude  with  respect  to  the  things  he  pays  out  the  company's 
money  for — materials,  supplies,  services,  tools,  construction.  He 
insists  upon  what  he  has  found  to  be  the  fit  standard  of  quality 


tem      m        fhl         ■»       «m         wr         m         m       m.         urt.        tcr.        «*.          « 

■"      Z"S        

j£    L 

S                                  3 

_                   ^-_ 

„„            _                 _3z:    £                               _  _    

3=:Zj=I          £ 

I  =  rl      SZ    j      £.zl±Z-\ 

I                                                          \      *,          <r 

»*                                                                                                                 _                                                   V^'rS- 

■":              i                           s:    vv*-=- 

'Alll1   -      -     /          N-^-^:-.-"-^o    ■    --  - 

uo^--^  =  =  ----.— ; ;---^-^^ =  =  -\ =  :£-_.! 

;L ,-                        \ti      , —  '                                                                        N ' 

tP 

4.00  1       |        5                    Jl                    15                    :>                    25                    30                    35                    40                    45                    50 

FIGURE  II:    New  York  wholesale  prices  in  cents  and  fractions  per  pound  on  granulated  sugar 

are  here  shown  graphically  by  weeks  for  four  years,  (A),  (B),  (C),  (D).     Such  figures  may  be  gleaned 

from  government  bulletins,  newspapers  and  trade  magazines.     In  handling  these  figures,  prices  were 

used  for  the  fifty-two  or  fifty-three  successive  Thursdays  of  each  year 

or  performance  and  sees  that  he  gets  it  by  testing.  He  buys 
nothing  on  chance  or  somebody's  say-so  or  out  of  friendship. 
For  he  realizes  that  standardized  conditions,  low  and  stable  costs 
and  uniform  quality  of  output  are  impossible  unless  the  materials 
and  instruments  of  production  are  likewise  standard. 

TESTING  RAW  MATERIALS  IN  THE  LABORATORY  KEEPS 
A  CHECK  AND  BALANCE  ON  PRODUCTION 


CO  the  large  manufacturer  equips  his  plant  with  laboratories — 
physical  and  chemical — wherein  such  tests  as  are  necessary 
may  be  made  with  every  facility.  And  he  does  not  leave  their 
location  and  arrangement  to  after-thought,  but  provides  for  them 
in  his  original  plans,  in  order  that  they  may  function  to  the  best 
possible  advantage. 


ROUTINE   BUYING 


Nor  does  he  stop  at  providing  for  routine  testing,  but  equips 
his  laboratories  to  reach  out  into  the  future  and  develop  new  and 
better  methods  and  processes,  materials  and  equipment.     Every 


pis  the  item  in  Constant  Demand  or 

Casual  or  Open  to  Substitution? 

-    Demand    - 

-  List  Your  Future  Needs  as  to « — 

-  Are  Markets  Uncertain  as  to 

Quantities 
Sorts 
Qualities 
Changes  in  Product 

Quantity? 

Quality? 

Delivery? 

How  Much  to 
Buy  at  Once 

-     Supply 

-  Will  Supplier,  on  Conditional  Orders,  Anticipate  Your  Needs  ami 

Maintain  Sources? 

-  What  Alternative  Sources  of  Supply  Do  You  Have? 

-  How  Does  Price  Vary  with  Quantity? 

-  How  Does  Quality  Vary  with  Quantity? 
-How  Does  Final  Cost  Vary  with  Quantity? 

■      Price 

L  How  Does  Delivery  Affect  Price? 

FIGURE  III:     Demand,  supply  and  price  must  be  taken  into  consideration  in  deciding  how  much 

to  buy  at  once.     The  questions  listed  under  each  head  suggest  the  factors  that  enter  into  the  problem. 

Right  buying  is  based  on  definite  knowledge  of  the  conditions  suggested  in  the  chart 

big  item  on  the  purchase  ledger  is  constantly  under  the  micro- 
scope which  searches  for  more  value  and  lower  cost.  If  the  plant 
is  small  and  a  private  laboratory  is  not  feasible,  close  connections 
are  established  with  commercial  laboratories  whose  services  can 
be  secured  for  a  small  fee.  Many  times,  however,  such  tests  as 
can  be  devised  in  the  workrooms  of  the  factory,  out  of  the  experi- 
ence of  the  men,  answer  every  purpose. 

These  methods  have  a  double  value.  As  a  part  of  his  inspec- 
tion system,  testing  his  raw  materials  provides  the  manufacturer 
with  the  necessary  check  and  balance  on  production  to  hold  it 
up  to  standard.  As  a  factor  in  creating  demand  and  holding 
trade,  it  is  primary  and  fundamental ;  nothing  is  so  potent  in  this 
respect  as  a  standard  of  quality.  One  does  not  buy  a  certain 
favorite  brand  of  soap  solely  because  advertising  has  made  its 
name  unusually  known,  but  also  because  in  quality  it  is  satis- 
factory and  uniformly  good. 

A  careful  buyer  also  watches  the  other  end — the  consumption 
and  output  of  the  factory.     These  he  gages  by  keeping  tab  on 


so 


PURCHASING   METHODS 


equipment,  plant  capacity  and  sales.  If  there  is  a  breakdown  of 
machinery  or  interruption  to  production,  the  consumption  of 
course  is  decreased.  Sometimes,  this  allows  an  opportunity  for 
advantageous  delay  in  placing  or  pushing  a  contract. 

Moreover,  definite  and  vital  relations  exist  between  the  pur- 
chasing and  sales  departments,  though  frequently  they  are  not 
recognized.  The  purchasing  agent  buys  when  the  market  is  low 
and  often  several  months  in  advance  of  the  needs  of  the  factory 
in  order  not  only  to  get  the  best  price  but  also  to  give  the  supplier 


-  Single  Contract  for  One  Lot 

Simple  Transaction  without 
Uncertainties 

Periodic  Deliveries  at  Agreed 
Prices 

Insures  against  Price  Advances  at 
Cost  of  Price  Recessions 

How  to  Adjust  Terms 

of  Purchase  to 

Market  Conditions 

Periodic  Deliveries  at  Prices 
Then  Current 

Assures  Seller  against  Loss  and 
Frees  Him  from  Temptation 
to  Scant  Quality  or  Service 

Deliveries  at  the  Then  Prices, 
between  Fixed  Limits 

Agreed  Maximum  Price  Protects 
Buyer  and  Minimum  Price 
Enables  Seller  to  Carry  Stock 

At  Cost  Plus  an  Agreed 
Per  Cent 

Supplier  Protected  and  Warranted 
in  Unusual  Developments  to 
Serve  the  Buyer 

FIGURE  TV:  Five  methods  of  adjusting  terms  of  purchase  to  market  conditions  are  here  shown. 
Each  method  has  one  or  more  distinct  advantages,  as  indicated  at  the  right.  .The  choice  should 
reflect  the  best  possible  adjustment  between  the  demands  of  the  business  and  conditions  in  the  market 


time  to  fulfill  his  contracts.  One  adding-machine  manufacturer, 
for  instance,  carries  a  two  and  even  a  three  years'  supply  of  his 
special  steel  as  a  protection  against  some  unforeseen  interruption 
in  the  supply,  as  a  strike  or  lockout  might  bring  about.  To  pro- 
vide intelligently  for  such  basic  needs  of  the  factory,  an  estimate 
of  the  volume  of  sales  for  the  coming  year  is  necessary.  The  sales 
manager  of  one  plant  makes  out  this  statement  in  detail  at  the 
beginning  of  every  fiscal  year.  It  covers  the  probable  sales  for 
each  commodity  turned  out  by  the  plant.  But  the  estimate  is 
not  sent  to  the  purchasing  agent  until  it  is  examined  and  ap- 


ROUTINE  BUYING 


81 


FORMS  I  and  II:      A  good  check  against  the  overstocking  of  materials  is  afforded  by  this  stock  and 

order  record  sheet.      A  list  of  all  machine  parts  is  analyzed  by  the  purchasing  department  and  all 

items  that  must  be  bought  from  outside  sources  are  noted  on  the  material-purchase  record 

proved  by  the  president.  This  serves  as  a  healthy  check  on  the 
estimate  of  the  sales  manager.  Long-time  purchasing  contracts 
are  then  made  with  the  statement  as  a  basis.  If  the  product 
is  one  that  was  manufactured  in  identical  form  the  previous 
year,  the  buyer's  task  is  simple,  provided  he  has  kept  the  proper 
records.     Changed  or  new  models,  however,  will  require  first  a 


PURCHASING  METHODS 


new  list  of  parts  from  the  engineering  department,  together 
with  the  proper  drawings.  It  then  becomes  the  duty  of  the 
purchasing  department  to  analyze  these  lists  and  ascertain  which 
parts  must  be  purchased  outside.  At  the  A.  B.  Farquhar  Com- 
pany such  outside  material  is  entered  on  5x8  cards  (Form  II) 
and  filed  in  a  standard  card-index  drawer  file.  Every  essential 
fact  is  set  down,  so  that  from  the  cards  material  can  be  ordered 
for  machines  in  any  quantity.  This  information  is  brought  into 
active  use  by  copying  it  on  the  Stock  and  Order  Record  shown 
as  Form  I,  which  is  an  8!/2xll  sheet  punched  for  a  standard 
binder.  While  on  the  cards  only  the  material  for  one  unit  is 
listed,  on  Form  I  the  total  quantities  that  will  be  required  are 
stated.  All  columns  except  the  one  headed  ' '  Quantity  on  Hand ' ' 
are  filled  in  by  the  purchasing  department.  For  this  the  infor- 
mation is  furnished  by  the  production  department.  The  last  two 
columns  headed  ' '  Ordered ' '  are  for  the  initials  of  the  firms  from 
whom  the  material  is  purchased.  A  second  column  is  provided 
in  case  all  of  the  material  wanted  is  not  ordered  at  the  same 
time.  This  record  (Form  I)  affords  a  splendid  check  against  the 
overstocking  of  materials.  While  it  is  still  possible  to  have  a 
surplus  of  completed  machines,  the  parts  will  be  evenly  balanced. 

Such  parts  as  are  regularly  kept  in  stock  are,  of  course,  not 
entered  on  either  of  these  forms,  but  are  controlled  by  maximum 
and  minimum  stock  limits.  Daily  the  stockkeeper  renders  a 
report  of  items  that  have  reached  their  low  limit,  stating  also 
the  desirable  ordering  quantity.  This  is  really  a  requisition  on 
the  purchasing  department  to  buy.  If,  however,  owing  to  a 
decline  in  the  demand  or  the  prospect  of  a  lower  market  or  any 
other  reason,  the  stated  quantity  seems  inadvisable,  the  purchas- 
ing department  may  raise  or  lower  it,  as  the  situation  warrants, 
so  notifying  the  stockkeeper.  They  may  also,  in  their  discretion, 
alter  the  stock  limits.  In  this  way,  the  evils  of  overbuying  and 
underbuying  of  standard  materials  are  largely  avoided. 

While  the  value  of  proper  purchasing  data  can  scarcely  be 
over-emphasized,  the  purchasing  agent  who,  because  of  reliance 
on  them,  lost  his  practical  grasp  on  the  factory  situation  and 
its  sources  of  supply,  would  soon  fail.  Records  after  all  are 
only  an  aid.  To  view  them  in  their  proper  light  requires  the 
constant  stimulus  of  contact  with  practice. 


ROUTINE  BUYING 


33 


"I  spend  half  the  time  away  from  my  desk,"  says  C.  F.  Marsh, 
purchasing  agent  for  the  Link-Belt  Company.  "lam  educating 
the  trade  to  call  in  the  morning;  the  rest  of  the  day  I  spend  in 
the  shop  and  outside  familiarizing  myself  with  market  conditions. 
I  know  the  requirements  of  the  shop  and  in  supplying  its  routine 
needs  I  do  not  wait  to  be  requisitioned.  When  the  market  is  low 
I  ask  for  specifications,  and  buy  supplies  and  materials  in  current 
demand  for  a  long  period." 

This  is  the  keynote  of  large  quantity  purchasing  to  supply 
routine  needs :  Buy  when  the  market  is  right  on  contracts  cover- 
ing a  considerable  period,  with  frequent,  perhaps  monthly, 
shipping  directions  (Figure  IV). 

Contracts  may  be  in  several  forms:  as  straight  contracts 
for  a  long  period,  sliding  scale  contracts,  contracts  varying  with 
the  market  price  of  the  raw  materials  composing  the  product  in 
demand,  or  contracts  let  on  a  "cost  plus"  basis.  The  supplier 
may  refuse  to  make  a  straight  contract  or  it  may  not  be  to  the 


How  to  Purchase  for  Routine  Needs 


Buyer  May  Purchase 
in  Open  Market 


FIGURE   V:       In  purchasing  for  routine  needs,  the  common  method  has  been  for  the  buyer  to  go 
directly  to  the  source  through  the  open  market  or  to  own  the  source._    The  tendency  toward  coopera- 
tive buying  is  evident  in  the  increasing  number  of  buyers'  associations  dealing  with  or  owning  the 
source  of  supply 


advantage  of  the  buyer  to  tie  himself  down  to  an  agreement. 
The  buyer  may  then  resort  to  the  sliding  scale  contract,  by  the 
terms  of  which  the  price  rises  automatically  at  fixed  intervals. 
A  Chicago  firm  has  repeatedly  purchased  materials  at  a  very 
satisfactory  price  under  such  a  contract.    Three  months  later, 


34 PURCHASING   METHODS 

an  increase  of  nine  per  cent  in  the  original  price  was  provided 
for.  The  purchasing  agent,  however,  stocked  up  during  the  first 
three  months  at  the  lower  price  to  meet  the  estimated  needs  of 
the  plant  during  the  balance  of  the  year.  But  this  action  was 
Dot  taken  until  the  purchasing  agent  had  calculated  the  real 
economy — that  the  interest  on  capital  so  invested,  with  deprecia- 
tion and  storage,  were  less  than  the  increase  in  price. 

FITTING  THE  TERMS  OF  THE  CONTRACT 
TO  THE  MARKET  CONDITIONS 

OOMETIMES  the  contract  provides  that  the  prices  of  the  sup- 
plies and  material  will  vary  with  those  of  the  materials  of 
which  the  commodity  to  be  bought  is  made.  Such  contracts  may 
have  maximum  and  minimum  clauses  which  provide  that  the 
price  cannot  fall  or  rise  beyond  a  specified  point.  These  agree- 
ments are  frequent  when  the  market  is  unstable  and  it  is  often 
expedient  to  make  them  at  such  a  time.  If  the  tendency  of  prices 
is  upward  a  straight  contract  for  a  considerable  period  can  only 
be  made  at  greatly  enhanced  prices,  which  future  conditions  may 
prove  unwarranted. 

Again,  orders  may  be  placed  on  a  "cost  plus"  basis — costs 
plus  reasonable  profit.  This  is  often  desirable  if  there  is  entire 
frankness  between  buyer  and  supplier. 

The  contracts  involving  large  amounts  ordinarily  are  approved 
by  the  president.  Sometimes  the  final  approval  is  left  to  the 
directorate.  There  are,  however,  certain  routine  needs,  to  supply 
which  only  purchases  in  small  quantities  are  necessary.  In  these 
instances,  the  final  approval  is  generally  given  by  the  shop 
superintendent.  The  practice  varies  with  particular  conditions, 
but  the  point  to  remember  is  that  there  should  be  a  recognized 
system  of  approval  for  all  contracts — with  the  delegation  of  the 
authority  to  approve  based  on  the  importance  of  the  contract. 

The  requirements  of  a  purchasing  department  may,  therefore, 
be  summarized  as  knowledge  of : 

(1)  Consumption. 

(2)  Specifications. 

(3)  Markets. 

And  these  requirements  are  most  satisfactorily  met  when  it  is 
clearly  recognized  that  the  purchasing  department  is  an  integral 


ROUTINE   BUYING  35 


part  of  the  factory  mechanism,  and  that  it  is  most  efficient  when 
in  close  sympathy  with  other  departments. 

To  supply  the  routine  needs  of  his  factory,  the  manufacturer 
may  adopt  other  methods  than  individual  direct  purchasing  (Fig- 
ure V) .  Sometimes  he  will  join  with  others  to  buy  supplies  and 
materials  or  to  develop  a  supply  source.  The  New  York  manu- 
facturing bakers,  for  instance,  combined  at  one  time  to  purchase 
flour.  Such  action  is  seldom  taken  by  factories  in  general, 
because  the  first  two  requirements  of  purchasing — knowledge  of 
consumption  and  knowledge  of  specifications — are  necessarily 
different  for  practically  every  plant.  Moreover,  the  limit  of 
price  reduction  by  the  increase  of  quantity  purchased  is  soon 
reached.  The  purchaser  of  five  carloads  of  coal  will  probably  be 
quoted  nearly,  if  not  quite  as  low  a  price  as  the  purchaser  of 
fifty  carloads.  Still  in  buying  many  supplies  and  materials, 
there  is  an  advantage  in  quantity  purchasing  which  manufac- 
turers may  be  able  to  capitalize  to  a  greater  extent  in  the  future 
than  in  the  past  through  the  cooperative  spirit  developed  by 
manufacturers'  associations.  The  possibilities  along  this  line  are 
shown  by  the  cooperation  of  certain  paper  manufacturers  to 
make  their  own  pulp  from  nearby  timber  supplies. 

However,  the  manufacturer  may  deem  it  expedient  to  develop 
a  proprietary  source  of  supply.  Sometimes  the  chief  motive 
for  this  move  is  the  desire  to  cut  costs  directly.  A  Brockton 
shoe  manufacturer,  for  example,  to  minimize  the  outlay  for 
packing  lumber  purchased  several  small  tracts  of  timber  in 
northern  New  England.  The  firm  itself  cuts  the  timber  and 
ships  the  lumber  to  Brockton.  At  other  times,  however,  the 
immediate  cause  for  developing  an  independent  source  of  supply 
may  not  be  primarily  the  desire  to  reduce  costs  directly  but 
rather  to  have  alternative  sources  of  supply.  Such  was  the  case 
of  a  New  York  concern  which  imported  hard  paints  from  Ger- 
many. To  protect  itself  against  the  inability  to  get  foreign 
supplies  the  company  experimented,  and  found  a  formula  satis- 
factory except  as  to  price.  The  German  manufacturer  could  still 
supply  the  paints  at  a  slightly  lower  cost,  but  the  American  firm 
held  the  whip-hand.  "If  you  raise  the  price,"  they  said,  "we'll 
make  the  paints  ourselves." 


IV 


SPECIAL  PURCHASES 


HAVING  completed  a  new  administration  building  of  rein- 
forced concrete  throughout,  a  Michigan  manufacturer 
recently  faced  the  necessity  of  making  a  one-time  pur- 
chase of  material  entirely  out  of  his  experience.  An  unforeseen 
difficulty  had  developed.  As  the  concrete,  without  excessive 
grinding,  would  not  afford  a  smooth  ceiling,  it  had  been  decided 
to  apply  a  thin  coat  of  plaster.  Now  smooth  concrete,  particu- 
larly on  an  overhead  surface,  is  difficult  to  plaster ;  and  although 
an  adhesive  bonding  coat  was  first  applied,  when  the  heating 
system  was  turned  out,  the  plaster  had  persisted  in  peeling 
despite  attempts  at  repairs. 

This  condition  finally  had  become  so  annoying  that  the  man- 
ager had  the  entire  plaster  coat  removed.  Then  he  began  to  look 
around  for  some  coating  which  would  not  drop  off  and  yet  pre- 
sent a  proper  appearance. 

He  got  in  touch  with  the  engineer  who  had  designed  the  build- 
ing (and  against  whose  judgment  the  plastering  had  been 
applied).  "Can  you  find  us  a  paint  which  will  overcome  our 
difficulties?"  he  wrote.  The  designer,  at  the  time  he  had  drawn 
his  specifications,  had  not  known  of  a  paint  which  just  filled  the 
bill  and  had  counted  upon  the  ceiling  coming  from  the  forms 
smooth  enough,  with  a  little  grinding,  to  take  ordinary  concrete 
paints.  However,  he  had  quietly  investigated  the  subject  further 
and  after  fruitless  conferences  with  several  specialists,  had  found 
finally,  through  a  salesman 's  suggestion,  a  firm  which  had  devel- 
oped a  paint  adapted  to  just  such  conditions. 

Manager  and  engineer  immediately  consulted  the  representa- 


Standardized  purchases  permit  storage  and  delivery  methods  which  cut  costs  and  facilitate  produc- 
tion.    In  the  Eastman  Kodak  plant  paper  stock  is  stored  on  standard,  numbered  steel  racks.     Every 
section  is  served  by  a  monorail  equipment  which  transfers  the  rolls  in  slings  to  a  special  type  of  truck. 
This  operates  on  an  industrial  railway  connecting  with  the  production  department 


At  the  A.  B.  Farquhar  Company,  desk  drawer  card  records  (top)  of  past  pricer  and  discounts  facilitate 
comparison  with  new  quotations  received  by  telegram.  In  one  stores  department  (below)  good  house- 
keeping is  maintained  by  piling  long  bars  between  uprights  set  in  the  concrete  floor,  and  by  starring 
short  bars  on  U-shaped  irons.     Monorail  hoists  with  tongs  and  trucks  provide  quick  service 


SPECIAL  PURCHASES  30 


tive  of  the  paint  concern,  who,  to  reassure  them  as  to  the  value 
of  the  paint,  agreed  at  his  firm 's  expense  to  finish  a  small  section 
of  the  ceiling  with  the  new  product.  On  the  strength  of  this 
trial  the  purchase  was  shortly  consummated  with  satisfactory- 
results. 

Ordinary  purchasing  records  were  in  this  case  of  no  avail. 
The  material  wanted  was  decidedly  special.  Orders  or  inquiries 
had  never  gone  out  of  the  house  for  anything  of  the  same  nature. 
The  fund  of  records  and  personal  experience  by  means  of  which 
the  purchasing  agent  continually  revised  and  refined  his  every- 
day purchases,  was  totally  lacking.  The  solution  of  the  problem 
was  simple,  however.  The  manager  had  recourse  to  an  outside 
specialist  who,  if  not  familiar  with  the  class  of  material  wanted, 
at  any  rate  knew  how  new  sources  of  supply  are  located.  And 
once  the  source  was  found,  by  putting  the  burden  of  proof  on  the 
salesman  and  taking  time  for  a  demonstration,  he  purchased  with 
practically  no  chance  of  disappointment  as  to  quality. 

This  is  a  problem  out  of  the  routine,  such  as  every  manufac- 
turer has  at  times  to  solve.  From  oversight,  unlooked-for  trade 
opportunities  or  some  grave  emergency,  needs  arise,  it  may  be 
for  new  buildings,  fittings,  machinery,  materials  or  supplies, 
which  are  decidedly  novel.  Often  not  even  the  source  of  supply 
is  known ;  standards  are  lacking  by  which  to  judge  quality,  and 
ideas  as  to  the  proper  price  are  decidedly  hazy.  If  the  need  is 
not  immediate,  however,  the  purchasing  department  has  time  to 
investigate,  supplement  its  scant  stock  of  information  by  methods 
already  indicated  and,  as  in  the  instance  given,  arrive  at  perhaps 
as  sound  a  purchase  as  if  the  item  were  routine. 

When  plenty  of  latitude  for  choice  exists,  the  buyer  who,  in 
making  a  special  purchase,  will  admit  to  himself  his  lack  of 
experience  and  his  need  for  it,  has  still  a  better  opportunity 
to  follow  correct  buying  principles.  Comparison  is  always  illumi- 
nating. 

A  large  manufacturer  of  cotton-seed  oil  products  in  the  South 
found  that  the  acid  fumes  given  off  in  manufacture  had  disinte- 
grated his  roofing.  He  determined  to  find  a  roofing  if  possible 
which  would  resist  the  fumes.  So  he  had  his  purchasing  man 
send  for  samples  of  different  widely  advertised  brands.  From 
these  he  had  his  chemist  cut  uniform  strips  and  place  them  for  a 


40 PURCHASING   METHODS 

time  in  the  neck  of  an  exhaust  hood  over  a  retort  in  the  labo- 
ratory which  produced  acid  fumes.  When  taken  down  all  but 
one  showed  unmistakable  signs  of  disintegration.  The  one  that 
came  through  comparatively  unscathed  accordingly  was  pur- 
chased with  assurance. 

In  both  of  these  instances  service  proved  by  test  was  the  abid- 
ing criterion.  Price  was  secondary  "and  date  of  delivery 
relatively  unimportant.  Many  times,  however,  one  or  both  of 
the  latter  factors  are  equally  important.  Then  the  problem  is 
more  difficult. 

HOW  TO  PLACE  ORDERS  IN  AN  UNKNOWN 
AND  LIMITED  MARKET 

IF  SEVERAL  good  sources  of  supply  are  known  or  can  readily 

be  found,  competition  will  take  care  of  prices  and,  to  a  certain 
extent,  grade  of  service.  If  only  one  reliable  source  is  developed, 
or  time  is  lacking  to  search  for  more,  getting  a  proper  price  may 
be  a  delicate  matter. 

1  *  Under  such  circumstances, ' '  says  one  buyer,  ' '  I  never  let  any 
man  know  that  I  am  a  novice  in  buying  that  particular  thing  or 
think  he  is  my  only  source.  I  act  as  if  it  were  an  everyday 
matter  with  me.  I  tell  him  I  am  in  the  market  for  so-and-so  and 
want  his  best  price  and  earliest  date  of  delivery.  He  knows  of 
the  competition,  if  I  don't,  and  usually  responds  with  a  reasona- 
ble quotation." 

Few  men,  however,  are  so  constituted  that  they  can  handle  the 
unprecedented  offhand  without  a  slip.  Often,  too,  that  the  buyer 
is  in  a  tight  box  is  public  knowledge.  Under  such  circumstances, 
says  the  head  of  a  specialty  business  which  frequently  has  novel 
purchases  to  make,  ' '  I  try  to  recall  who  in  my  circle  of  acquaint- 
ances uses  what  I  need.  Then  I  find  out  where  they  get  it  and 
what  they  usually  pay.  Salesmen  friends  are  also  funds  of  infor- 
mation on  such  points.  By  persistence  and  liberal  use  of  the 
telephone,  I  usually  am  able  in  the  course  of  an  hour  or  so  to 
get  on  solid  ground  as  to  price,  deliveries,  grades,  sources,  or 
whatever  the  sticking  point  is." 

Instead  of  trying  to  get  competitive  quotations,  however,  it 
-nay  at  times  be  wise  to  buy  without  parley  of  the  firm  you  know 
by  reputation  to  be  most  dependable  as  to  price  and  service.    The 


SPECIAL  PURCHASES 41 

intensity  of  your  need  must  determine  whether  test,  reputation 
or  chance  is  to  be  entrusted  with  the  order. 

A  good  buyers'  directory  is  another  source  of  help.  Published 
lists,  however,  will  be  disappointing  unless  the  buyer  knows 
which  firm  names  mean  quick  service.  More  dependable  is  a 
carefully  built  card  list  of  suppliers  about  whom  the  purchasing 
agent  has  definite  knowledge. 

Familiarity  with  the  stocks  of  suppliers,  too,  is  valuable, 
according  to  H.  A.  Russell  of  the  A.  B.  Farquhar  Company.  A 
buyer  who  knows  his  possible  requirements,  no  matter  how  varied 
they  may  be,  will  index  mentally  a  large  number  of  items  as  he 
passes  through  a  supplier's  mill.  For  this  reason,  if  no  other, 
he  should  take  time,  whenever  possible,  to  inspect  stocks.  This 
pleases  the  supplier  and  helps  the  buyer  himself  to  an  extent 
which  can  only  be  appreciated  when  a  demand  comes  for  ma- 
terials to  satisfy  a  rush  order  or  something  out  of  the  line  of 
previous  purchases. 

Mr.  Russell  also  lays  emphasis  on  cooperation  between  the 
purchasing,  production  and  sales  departments  in  the  matter  of 
anticipating  unusual  requirements.  The  sales  department  may 
have  information  regarding  the  probable  receipt  of  an  unusual 
order,  or  one  which  perhaps  will  require  a  larger  quantity  of 
certain  items  than  the  regular  stock  can  supply.  If  this  infor- 
mation is  at  once  passed  along  to  the  production  and  purchasing 
departments,  they  can  note  the  special  requirements  and  begin 
their  preliminary  work.  Quotations  can  be  secured,  deliveries 
ascertained,  and  a  compromise,  if  unavoidable,  struck  between 
what  is  wanted  and  what  is  immediately  available.  When  the 
customer's  order  actually  is  entered,  the  department  is  ready  for 
immediate  action. 

This  buyer's  way  of  qualifying  himself  to  handle  special 
purchases  is  typical  of  the  methods  followed  by  alert  purchasing 
men.  The  buyer  who  allows  himself  to  be  caught  napping 
because  it  has  never  occurred  to  him  that  extraordinary  needs 
would  arise,  probably  lacks  constructive  imagination.  He  should 
picture  in  his  own  mind  the  operation  of  the  plant  for  weeks 
ahead.  The  factory  that  would  make  the  most  of  its  opportuni- 
ties cannot  afford  for  a  single  day,  sometimes  not  even  for  an 
hour,  to  be  held  back  for  lack  of  materials,  supplies,  equipment 


42 PURCHASING   METHODS 

and  tools  proper  in  respect  to  grade,  entirely  adequate  in  quan- 
tity and  reasonable  in  cost. 

WINNING  WORKMEN'S  APPROVAL  OF  NEW 
SUPPLIES  OR  EQUIPMENT 

TN  MAKING  special  purchases  another  point  to  bear  in  mind  is 
the  attitude  of  the  shop,  if  it  is  an  article  the  men  are  to  use. 
Workmen  and  foremen  alike  are  naturally  prejudiced  against 
new  things  and  many  an  improved  type  of  equipment  or  supply 
has  found  its  way  promptly  to  the  scrap  pile  because  the  men 
felt  it  was  being  forced  on  them  or  that  they  should  have  been 
consulted  in  advance.  The  shop,  moreover,  is  a  valuable  source 
of  help ;  if  properly  approached  the  men  often  will  be  found  to 
know  when  you  don't. 

One  manufacturer  has  his  foremen,  on  their  vacations,  "nose 
around"  to  find  out  about  special  items  for  which  there  is  likely 
to  be  need.  In  the  investigation  their  enthusiasm  is  won  for  the 
change.  A  Des  Moines  printer  follows  this  practice  himself  in 
regard  to  new  equipment  and  paper  stock.  At  vacation  time 
either  he  or  his  partner  visits  the  plant  of  some  maker  whose 
product  they  are  interested  in.  Then  he  visits  a  number  of 
users,  talks  with  the  pressmen  if  possible,  and  thus  corrects  with 
practice  what  he  has  heard  and  seen  in  the  plant  of  the  maker. 

More  extensive  still  is  the  plan  followed  by  another  Iowa  man- 
ufacturer. He,  too,  uses  his  vacation  nearly  every  year  to  visit 
other  shops.  His  interest  is  two-fold :  to  check  upon  advances  in 
manufacturing  methods  and  to  observe  the  performance  of  equip- 
ment and  other  items  he  may  some  time  need.  "When  later  he 
gets  in  touch  with  a  supplier  direct,  he  is  already  fortified  by  a 
knowledge  of  practice  and  is  less  likely  to  be  swayed  by  salient 
advertising  claims.  This  manufacturer  incidentally,  in  the  course 
of  his  many  trips,  equips  himself  with  a  valuable  knowledge  of 
suppliers'  stocks  and  new  sources  of  supply  which  helps  him  to 
make  his  contracts  and  satisfy  his  special  needs  to  unusual 
advantage. 

In  this  study,  also,  the  cost  of  the  product  to  be  bought  de- 
serves close  attention.  The  question  is  not  merely  ' '  What  can  we 
afford  to  pay?"  or  "At  what  price  will  the  purchase  return 
dividends?"  but  also,  "What  is  a  reasonable  figure  based  upon 


SPECIAL  PURCHASES 43 

production  costs?"  Shop  investigations  give  the  buyer  a  shrewd 
instinct  for  values  and  indicate  how  by  changing  his  require- 
ments he  can  often  reduce  cost  and  price. 

Emergency  purchases  present  a  slightly  different  problem 
than  the  foregoing.  Price,  quality  and  service — the  three 
important  elements  of  any  purchase — are  almost  as  easy  to  sat- 
isfy in  case  of  special  purchases  that  can  be  made  at  leisure  as 
with  routine  requirements.  The  buyer  merely  rounds  out  his 
experience  accordingly  to  methods  with  which  he  is  already 
familiar.  When  the  time  factor  is  predominant,  however,  he 
often  has  to  "take  a  chance"  on  quality  or  service  and  the  grave 
nature  of  the  demand  may  dwarf  the  consideration  of  price. 
How  to  get  price  and  quality  without  sacrificing  prompt  delivery 
is  a  task  that  calls  for  the  highest  order  of  purchasing  ability, 
backed  by  broad  knowledge  of  the  market  and  cordial  relations 
with  all  probable  sources. 

Seldom  is  a  purchasing  department  so  severely  tested  as  was 
Edison's  when  late  in  1914  fire  gutted  his  plant.  Almost  before 
the  flames  had  died  away,  his  buying  force  was  on  the  job. 
Within  two  hours,  the  very  night  of  the  blaze,  approximately 
three  hundred  and  fifty  telegrams  were  sent,  most  of  them  carry- 


If  this  Order    Cannot  Be  Given   IMMEDIATE   RIGHT  OF  WAY 

Telegraph  at  once  at  Our  Expense. 

The  material  covered  by  attached  Edison  Storage  Battery  Company's  Purchase  Order 

No is  for  re-equipping  the  Plant  of  the  Edison  Phonograph  Works,  DESTROYED 

BY  FIRE,  Dec.  9, 1914,  and  Mr.  Edison,  personally,  and  his  staff  are  working  day  and 
night  on  the  reconstruction. 

The  Edison  Storage  Battery  Plant  was  in  no  way  injured  by  the  fire,  and  is  therefore 
called  upon  to  help  recover,  rebuild  and  install  the  machinery  for  the  allied  companies. 
Other  manufacturers  are  assisting  us  to  make  this  a  record  recovery. 

ARE  YOU  WITH  US  ALSO?     If  so,  Ship  by  Quickest  Route  and  Bill  to  Us 

R.  A.  Bachman,  Viee-Pres.  and  Gen'l  Mgr. 
Edison  Storage  Battery  Co., 
Form  1169-12-14-1M  Orange,  N.  J. 


FIGURE  VI:  Printed  in  red,  and  carrying  a  heavy  red  border,  this  emergency  label  commanded 
instant  attention  for  the  order  to  which  it  was  attached.  The  emphasis  laid  on  speed,  the  reason  for 
it  and  the  appeal  for  enthusiastic  cooperation  are  evident  in  the  words  capitalized  and  underscored 

ing  either  inquiries  or  orders.  Firms  with  which  the  corpora- 
tion had  dealt  previously  naturally  were  requisitioned  first. 
When  these  could  not  deliver,  other  houses  were  chosen  by  repu- 
tation or  special  information.    Many  concerns  wired  their  readi- 


44 PURCHASING   METHODS 

ness  to  help  before  even  there  was  time  to  solicit  them.  Each 
confirming  order  carried  a  red-lettered  sticker  (Figure  VI) .  The 
word  "rush"  nowhere  appears,  yet  the  appeal  for  the  quickest 
kind  of  quick  service  is  unmistakable,  even  electrifying. 

And  this  was  the  kind  of  action  secured :  an  order  was  wired 
to  Providence,  Ehode  Island,  at  2:30  o'clock  one  afternoon.  The 
shipment  was  received  the  next  afternoon,  with  the  red-lettered 
sticker  from  a  previously  received  order  pasted  on  the  box. 

Though  price  bargaining  was  practically  ignored  in  placing 
these  orders,  moreover,  the  frank  appeal  to  suppliers  for  quick 
action,  on  honor  as  to  quality  and  cost,  resulted  almost  uni- 
formly in  the  fairest  of  treatment. 

Back  of  this  achievement  in  purchasing  were  records,  experi- 
ence, buying  power,  prestige,  good  will  and  sound  tactics.  The 
buyer  did  not  wait  to  be  sold.  He  took  the  aggressive  from  the 
first  hour  in  investigation,  decision  and  action. 

In  spite  of  the  extreme  urgency,  moreover,  Edison  neglected 
no  practicable  precautions  to  insure  the  quality  of  purchases 
which  were  out  of  his  experience.  "When  in  doubt,  he  paused 
long  enough  to  make  sure.  In  buying  steel  sash  to  replace  the 
wood  that  had  been  burned  out,  although  the  complement  for 
one  building  was  ordered  without  any  preliminaries,  before  the 
general  order  was  placed  different  manufacturers  were  invited  to 
submit  samples  for  test.  A  special  test  chamber  was  rigged  up, 
and  after  the  glazed  sash  had  been  subjected  to  a  fire  of  kerosene 
and  celluloid,  a  hose  stream  was  turned  on.  The  make  which 
stood  up  best  was  purchased,  notwithstanding  it  was  one  of  the 
highest  in  first  cost,  and  the  firm  which  booked  the  order  recipro- 
cated by  filling  it  in  record  time. 


DECIDING  WHETHER  TO 
BUY  OR  MAKE 


WHAT  to  make  and  what  to  buy  is  a  question  which  every 
change  in  conditions  brings  again  and  again  before 
most  manufacturers.  Certain  portions  of  the  equip- 
ment and  product  it  undoubtedly  pays  to  make;  certain  other 
portions  it  is  profitable  to  buy.  In  between  are  items  that  are 
hard  to  decide  on,  and  here  the  question  keeps  bobbing  up.  Nor 
is  the  calculation  of  the  right  way  simple.  Many  other  consid- 
erations besides  price  enter  into  the  decision.  In  some  cases  it 
is  profitable  to  pay  a  little  higher  price  and  buy  outside ;  often, 
however,  it  is  poor  business  to  buy  even  when  the  quoted  prices 
are  below  the  home  shop's  cost  (Figure  VII). 

Business  judgment  quickly  furnishes  the  answer,  where  the 
manufacturer  lacks  the  knowledge  or  facilities  for  producing  the 
certain  part  or  the  quality  desired.  A  manufacturer  of  household 
utensils  put  on  the  market  a  high-grade  chafing  dish  which  he 
furnished  in  both  nickel  and  burnished-copper  finish.  He 
planned  to  use  a  dead-black  finish  wooden  handle  such  as  he  had 
used  on  his  cheaper  product.  Experiments,  however,  showed 
that  it  was  very  difficult  to  produce  an  enamel  without  gloss  and 
that  a  shiny  handle  cheapened  the  appearance  of  his  chafing 
dish.  Consequently  he  decided  that  he  could  well  afford  to  pay 
three  cents  for  the  handle  he  desired,  purchasing  it  from  a  con- 
cern specializing  in  such  handles,  although  his  own  factory  could 
produce  the  slightly  inferior  handle  at  something  below  one  cent. 
Here  the  two  cents  extra  cost  was  justified  by  the  greater  sala- 
bility  of  the  final  product.  Many  such  cases  arise,  in  which  minor 
parts  purchased  outside  at  a  price  much  higher  than  the  factory's 
cost  are  a  good  investment. 


46 PURCHASING   METHODS 

Another  common  situation  is  where  a  concern  is  doing  a  heavy- 
business  on  small  capital.  Two  young  men  began  to  manufacture 
a  line  of  hardware  with  which  they  were  fairly  familiar.  One 
of  them  promptly  formed  selling  alliances  that  loaded  their 
factory  with  orders  which  taxed  their  financial  resources  to  the 
utmost.  Their  business  was  a  rather  special  and  hazardous  one, 
and  capital,  if  obtainable  at  all,  ~vas  only  to  be  had  at  a  rate 
unfavorable  to  a  young  business.  -/Taking  the  business  build  up 
its  own  capital  therefore  seemed  wise.  To  do  this  both  the  owners 
cut  their  personal  expenses  to  the  quick.  They  were  buying  a 
lot  of  punched  work  and  it  soon  became  evident  that  a  modern 
punch  press  would  be  an  excellent  investment,  not  only  on 
account  of  the  saving  in  actual  expense,  but  also  on  account  of 
the  greater  control  of  production  it  would  give  and  the  conse- 
quent better  deliveries  that  would  result.  A  little  figuring, 
however,  convinced  the  partners  that  the  money  spent  for  the 
press,  if  invested  in  additional  stock  or  used  in  similar  channels, 
would  yield  a  much  larger  return  than  they  could  hope  for  from 
the  new  tool.  Here  was  a  place  where  it  did  not  pay  to  make 
goods,  even  at  an  apparent  saving,  on  account  of  the  money  tied 
up.  The  same  partners  found  that  on  many  items  in  their  line, 
if  they  were  to  be  prepared  to  fill  orders,  they  had  to  carry  ex- 
cessive stocks.  Some  of  the  articles  moved  slowly  and,  if  manu- 
factured in  anything  like  economical  quantities,  left  large 
amounts  of  dead  stock.  Here  again  it  was  cheaper  to  buy  as 
needed,  even  at  a  higher  price  and  to  confine  attention  to  the 
bulk  items  of  the  business. 

For  somewhat  similar  reasons  a  large  electrical  concern  has 
repeatedly  declined  to  go  into  the  manufacture  of  porcelain. 
Porcelain  insulators  are  used  in  large  quantities  in  their  factories 
and  their  business  is  an  attractive  one  for  the  porcelain  factories. 
It  has  always  seemed  to  certain  of  the  executives  that  a  porcelain 
factory  should  form  a  part  of  their  plant.  The  president,  after 
careful  study,  decided  that  such  a  step  would  be  unwise.  He 
found  that  there  were  a  half  dozen  factories  eager  for  their 
porcelain  business,  and  that  prices  were  uniform  and  deliveries 
good.  Investigation  showed  that  the  manufacture  of  electrical 
porcelains  was  a  rather  difficult  technical  problem  and  that  the 
successful  concerns  had  been  at  it  a  long  time.    A  further  study 


WHETHER  TO   BUY  OR   MAKE 


47 


backed  by  some  confidential  information  disclosed  the  fact  that 
none  even  of  the  successful  concerns  was  making  large  profits 
and  that  the  average  factory  which  attempted  to  do  business  on 
a  strictly  competitive  basis  did  so  at  a  loss.  As  he  had  a  good 
purchasing  department,  was  the  largest  buyer  in  the  country 
and  knew  competition  among  his  sources  to  be  free,  the  president 
could  see  no  reason  for  saddling  his  plant  with  another  industry. 
His  decision  as  to  a  glass  factory  was  quite  different.  They 
already  had  a  separate  factory  making  incandescent  lamps  and 
buying  the  glass  blanks  in  the  open  market,  when  the  mercury-arc 
rectifier  came  into  the  field.  In  the  rectifier  a  large  glass  bulb  is 
exhausted,  then  supplied  with  terminal  electrodes  and  a  small 
body  of  mercury.  The  lamp  factory  attempted  the  manufacture 
and  failed.  At  the  main  plant  a  staff  of  chemists,  engineers  and 
research  men  succeeded  in  producing  a  few  of  the  lights.     By 


-  Does  Higher  Quality  Obtainable  Outside  Enhance  Selling 

Price  More  Than  Cost? 

-  Are  Financial  Resources  limited  and  Would  They  Be 

Better  Invested  in  Stock  Than  Equipment? 

-Is  Quantity  Required  Too  Small  for  Economical 
Manufacture? 

-Will  Outside  Purchasing  Help  to  Develop  Competition? 

-Does  Buying  Educate  Your  Trade  to  an  Outside  Brand 
That  May  Hamper  You  Later? 

-Are  the  Favorable  Outside  Markets  Merely  Temporary, 
or  Open  to  Monopoly? 

-Will  It  Supply  Fill-in  Work  for  the  Plant  or  Hold  Trade? 

Advantages 
of  Buying 

Special  Factors 
in  the  Problem 
of  Whether  to 
Buy'  or  Make 

Advantages 
L      of  Home 
Manufacture 

FIGURE  VII:  In  deciding  almost  any  problem  of  whether  to  buy  or  make,  certain  advantages  will 
suggest  buying  and  others  home  manufacture.  Questions  for  testing  such  suggestions  are  here  listed. 
Obviously,  one  question  will  be  more  important  than  the  others  and  thus  become  the  deciding  one 


equipping  a  small  factory  and  using  constant  diligence  a  com- 
mercial article  was  finally  produced;  and  in  the  course  of  time 
the  factory  was  enlarged  to  a  point  where  the  line  showed  a  good 
profit.  Here  the  very  special  nature  and  importance  of  the  work 
anchored  it  inside  the  main  plant.  It  was  the  exact  opposite  to 
the  case  of  the  chafing  dish  handle.     In  that  case  quality  require- 


48 PURCHASING   METHODS 

ments  took  the  business  outside,  while  in  the  rectifier  case  the 
business  was  forced  on  the  factory  itself. 

HOW  BUYING  INSTEAD  OF  MAKING  MAY  BUILD 
UP  BUSINESS  FOR  YOUR  COMPETITOR 

1~\UE  weight  must  also  be  given  to  the  question  of  building  up 
a  competitor.  A  certain  factory  has  for  two  generations 
been  recognized  as  the  premier  engine  builder  of  the  country. 
For  many  years  the  bulk  of  its  business  was  large  engines  for 
heavy  power  purposes.  It  bid  on  complete  plants,  and  these  often 
included  small  auxiliary  engines.  Although  the  small  engine 
business  of  the  country  is  and  was  then,  very  large,  this  particular 
concern  would  not  lower  its  dignity  by  engaging  actively  in  the 
business.  The  result  was  that  most  of  the  small  engines  were 
built  by  a  younger  and  much  smaller  company,  which  gained 
an  excellent  business  and  reputation,  partly  at  least  from  the 
leavings  of  the  big  company.  It  was  not  many  years  before  the 
smaller  company  began  to  enter  the  field  of  medium  and  large 
engines,  and  it  soon  became  a  formidable  competitor  on  the 
middle  sizes  of  engines.  The  coming  of  the  steam  turbine  killed 
the  large  reciprocating  engine  business,  and  the  two  concerns  are 
now  about  equal  in  size  and  trade  volume.  The  concern  which 
was  originally  the  smaller  is  forging  ahead,  and  the  larger  con- 
cern is  dropping  back.  There  is  only  one  end  to  such  a  story. 
Here  the  larger  concern  voluntarily  became  a  customer  of  the 
smaller  and  materially  helped  to  build  up  a  formidable  com- 
petitor. It  would  have  been  good  business  policy  for  it  to  build 
small  engines,  even  temporarily  at  a  slight  loss.  If  they  had 
done  this,  with  their  experience  and  reputation,  they  no  doubt 
would  still  have  a  profitable  business.  In  general  it  is  unwise  to 
buy  from  a  competitor.  He  is  your  adversary  in  the  business 
game,  and  his  profits  are  not  only  his  gain  but  your  loss  as  well. 
Buying  outside  sometimes  helps  your  competitor  even  when 
you  do  not  buy  from  him.  One  concern  found  this  out  to  its 
sorrow.  It  used  a  special  form  of  chain  which  it  produced  and 
which  gave  its  goods  a  certain  distinction  in  the  trade.  The 
principal  reason  for  making  this  part  was  that  apparently  the 
chain  makers  did  not  care  to  trouble  with  it,  as  the  process  was 


WHETHER  TO  BUY  OR  MAKE 49 

a  difficult  and  expensive  one.  It,  therefore,  enjoyed  practically 
a  monopoly  for  some  years.  The  high  price  charged,  however, 
finally  attracted  the  attention  of  a  Connecticut  Yankee  who 
devised  a  set  of  special  tools  for  producing  the  chain.  But  the 
market  was  not  sufficiently  large  for  him  to  make  much  profit 
unless  he  charged  a  good  price.  After  considerable  negotiating 
he  persuaded  the  factory  in  question  to  contract  with  him  for  a 
large  quantity  of  the  article  and,  with  a  good  volume  of  business 
thus  assured,  he  could  afford  to  make  a  sweeping  reduction  in 
price.  He  not  only  interested  competing  concerns,  but  in  some 
cases  sold  chain  to  such  concerns  at  a  lower  price  than  to  his 
original  customer.  By  buying  parts  outside,  the  pioneer  concern 
established  a  factory  for  the  manufacture  of  such  parts  and 
cheapened  their  costs  to  competitors. 

Again,  a  supplying  factory  may  be  so  strongly  built  up  by 
continued  patronage  as  to  be  tempted  to  go  into  the  business  of 
making  the  completed  product.  Not  a  few  concerns  have  found 
themselves  thus  suddenly  confronted  with  new  and  powerful 
competition  and  at  the  same  time  shut  off  from  a  principal  source 
of  supply.  The  astute  manufacturer  will  guard  against  this 
contingency  either  by  scattering  his  purchases  widely  or  by 
depending  on  others  for  such  a  minor  fraction  of  his  supply 
that  not  even  a  merging  of  their  interests — a  remote  possibility 
in  any  event — would  furnish  him  dangerous  competition. 

What  threatened  to  be  a  case  of  this  kind  with  one  of  the 
biggest  automobile  manufacturers  in  1914,  turned  out  quite  other- 
wise. For  years  he  had  been  buying  a  large  number  of  his 
parts  from  one  concern.  As  he  grew,  so  did  his  supplier.  One 
day  the  trade  was  startled  by  a  simultaneous  announcement. 
From  the  motor  manufacturer  came  the  word  that  hereafter  he 
would  make  all  his  own  parts;  from  his  supplier,  that  a  new 
car  would  soon  be  put  on  the  market.  Rumor  had  it  that  there 
had  been  a  break  between  the  two,  and  that  the  supplier  would 
enter  the  field  as  a  competitor.  Consequently,  when  the  specifi- 
cations for  the  new  car  were  given  to  the  trade,  many  were 
surprised  to  find  that  it  was  in  an  entirely  different  class.  Later, 
when  the  two  principal  owners  of  the  second  firm  were  disclosed 
as  large  stockholders  in  the  first,  enlightenment  came.  Far  from 
being  a  break,  there  had  been  a  tacit  understanding  between  the 


50 PURCHASING   METHODS 

two  companies.  The  original  car  manufacturer  had  simply  come 
to  the  point  where  he  felt  he  could  make  the  parts  in  question 
cheaper  than  he  could  huy  them  and  for  years  had  been  quietly 
preparing  to  do  so.  The  other,  foreseeing  this,  had  been  making 
his  preparations  also.  Each  was  proceeding  with  perfect  under- 
standing of  the  other's  intentions,  and  what  at  first  seemed  to 
be  a  vital  mistake  on  the  part  of  the  supplier,  proved  a  loss  to 
neither. 

WHEN  IT  PAYS  TO  MAKE  AND  USE 
AN  UNBRANDED  DEVICE 

A  NOTHER  instance  of  unwise  buying  was  that  of  an  auto- 
mobile  manufacturer  who  placed  on  his  car  a  patented  device 
furnished  outside.  Liberal  advertising  on  his  part  and  by  other 
automobile  manufacturers  established  this  device  in  the  public 
eye.  Today  the  car  builder  pays  just  twice  the  original  price  of 
the  article,  and  he  is  further  mortified  by  seeing  a  fraction  of  his 
good  money  spent  in  general  advertising  that  makes  it  out  of 
the  question  to  discard  the  article.  As  he  puts  it,  he  is  an  agent 
working  without  pay  for  the  maker  of  the  article.  He  is  not  the 
gainer  by  using  the  device,  as  all  his  competitors  also  use  it.  If 
he  could  discard  it  he  could  materially  lower  his  price  and  in- 
crease his  net  profits.  So  it  often  pays  to  make  and  use  an 
unbranded  device  rather  than  to  come  under  the  control  of  a 
patent  monopoly. 

The  circumstances  under  which  a  low  price  is  made  often  call 
for  investigation  before  the  factory  determines  upon  outside 
purchasing.  An  umbrella  manufacturer  had  an  attractive  price 
made  to  him  for  a  supply  of  parts.  After  purchasing  such  parts 
for  about  a  year  he  dismantled  his  machinery  for  making  them 
and  used  the  space  for  other  purposes.  Shortly  after  this  there 
was  an  abrupt  increase  in  price.  Investigation  showed  that  the 
original  price  was  made  to  work  off  a  lot  of  material  that  had 
accumulated  as  a  by-product  in  a  highly  specialized  chemical 
works.  When  the  accumulation  had  been  disposed  of  the  price 
went  up,  and  by  the  time  the  manufacturer  had  remantled  his 
equipment  he  had,  in  the  total,  lost  money.  Before  purchasing 
outside,  to  the  entire  exclusion  of  factory  facilities,  it  is  always 


WHETHER  TO   BUY  OR   MAKE 51 

wise  to  investigate  the  reason  for,  and  the  permanence  of  the  low 
price.  Any  source  of  supply  that  is  not  permanent  is  manifestly 
untrustworthy. 

Sometimes  factory  conditions  dictate  that  an  article  shall 
be  made  at  a  loss.  A  good  example  is  the  production  of 
knife-switches  by  one  of  the  big  electrical  manufacturing  con- 
cerns. The  knife  switch  is  the  orphan  of  the  electrical  business. 
Standardized  by  the  National  Board  of  Fire  Underwriters,  its 
design  is  fixed.  It  must  be  just  so  large  and  constructed  in  such 
and  such  a  way.  Anyone  can  make  it,  so  far  as  the  design  goes. 
If  the  maker  follows  the  Underwriters'  specifications  he  will 
produce  a  switch  that  practically  duplicates  those  of  all  his  com- 
petitors. The  amount  of  material  required  will  not  vary.  It  is 
of  simple  construction,  requires  few  tools  to  make  and  can  be 
produced  competitively  by  anyone  having  even  inexpensive 
equipment.  The  business,  therefore,  is  on  a  very  keen  com- 
petitive basis. 

The  concern  in  question  had  two  general  outlets  for  switches. 
First,  it  sold  switches,  mounted  on  their  own  bases,  for  general 
use;  and  second,  it  assembled  switches,  on  switchboards,  with 
meters,  circuit  breakers,  and  so  on.  The  first  it  handled  at  a 
loss,  the  second  at  a  large  profit.  The  switches  used  in  the  second 
business  differed  slightly  from  the  separately  mounted  switches 
and  were  often  special.  An  investigation  showed  that  the  manu- 
facturing costs  of  the  separately  mounted  switches  made  by  this 
concern  were  in  excess  of  the  cost  of  switches  bought  in  the  open 
market.  It  seemed  desirable  therefore  to  buy  such  switches  out- 
side. It  also  seemed  impossible  to  buy  the  switches  needed  for 
switchboard  purposes,  due  to  the  variable  nature  of  them.  If 
the  regular  production  of  standard,  separately  mounted  switches 
was  discontinued,  however,  the  cost  of  the  switchboard  mounted 
would  quite  evidently  increase,  because  separately  mounted 
switch  work  was  done  for  stock  and  constituted  a  ready  task 
for  men  between  special  jobs. 

The  question,  therefore,  was  not  whether  the  separately 
mounted  switches  could  be  bought  for  less  outside,  but  whether 
the  switch  business  as  a  whole  would  not  suffer  if  they  were 
bought.  It  was  decided  that  it  would  suffer  and  that  the  remedy 
was  not  to  buy  outside,  but  rather  to  sell  more  outside  and  thus 


52     PURCHASING  METHODS , 

increase  the  volume  of  standard  switches  passing  through  the 
department.  A  radical  cut  in  price  increased  these  sales  and, 
although  resulting  in  a  temporary  loss,  was  soon  followed  by- 
recovery  as  the  costs  fell  before  better  standardized  work.  This 
improvement  in  turn  reduced  switchboard  costs  and  increased 
the  profits  thereon. 

To  consider  one  part,  therefore,  and  to  base  your  decision  on 
that  part  alone,  is  not  always  good  judgment.  Other  articles  may 
be  linked  with  it,  so  that  an  apparent  profit  may  be  a  real  loss  or 
the  reverse.  The  net  total  of  profit  or  loss  in  the  long  run  is  the 
test. 

Generally  it  pays  to  buy  outside  when  the  market  will  supply 
the  articles  you  need,  in  the  proper  quality  and  at  an  attractive 
price.  It  is  not  profitable  to  patronize  competitors,  or  to  broaden 
a  market  and  lower  prices  where  they  buy.  It  sometimes  pays 
to  manufacture  parts  at  a  loss  or  to  buy  parts  at  a  loss,  if  a 
higher  selling  price  can  be  thereby  obtained  for  the  assembled 
article.  Low  prices  quoted  by  outside  manufacturers  should  be 
scrutinized  to  see  that  the  concern  making  the  bid  is  responsible 
and  that  the  prices  quoted  are  likely  to  be  permanent.  And 
finally,  while  costs  can  be  determined  accurately,  the  cost  of  one 
article  may  be  increased  when  you  cease  to  make  another.  Costs 
are  interdependent  and  not  fixed,  as  is  often  imagined.  Broadly 
speaking,  a  low  quotation  from  outside  should  be  carefully  con- 
sidered before  you  purchase  articles  that  could  be  made.  That 
you  can  produce  parts  more  cheaply  than  you  can  buy  them, 
however,  is  not  always  a  conclusive  reason  in  favor  of  home 
manufacture,  nor  when  the  conditions  are  reversed,  that  you 
should  always  buy  rather  than  make.  Broad  policy  considera- 
tions underlie  the  decision  in  the  last  analysis. 


VI 

HOW  PRICE  AND  SERVICE 
ARE  SECURED 


SAGACIOUS  buying  wins  the  minimum  price  with  the  maxi- 
mum service.  It  is  a  study  of  conditions  from  the  view- 
point of  the  other  man.  It  is  gaining  a  definite  advantage 
by  knowing  what  the  firm  from  which  you  are  buying  can  fairly 
afford  to  do  in  the  matter  of  qualities,  prices  and  deliveries. 
There  are  always  methods  of  making  an  order  easier  to  handle, 
more  desirable  to  the  source  and  less  open  to  sales  tactics  that 
border  on  unfairness. 

Mastery  of  conditions  and  an  analysis  of  the  other  man 's  atti- 
tude are  the  essentials  of  good  buying.  The  general  manager  of 
an  ore-boat  line  sent  to  the  four  big  ship-building  concerns  in  his 
Great  Lakes  city  this  invitation : 

"Can  you  have  a  representative  in  my  office  at  ten  o'clock 
Thursday,  prepared  to  submit  a  figure  on  two  ore  boats?  As 
you  can  see  from  the  specifications  herewith,  the  new  boats  will 
be  practically  the  same  as  the  last  one  we  had  built. ' ' 

Now,  ore  boats  cost  about  two  hundred  thousand  dollars  and 
an  order  for  more  than  one  was  then  so  unusual  that  the  selling 
chief  of  each  of  the  four  companies  responded  in  person.  The 
usual  custom  was  for  the  buyer  to  talk  to  each  builder  individ- 
ually, compare  the  prices  item  by  item  and  award  the  contract 
at  his  leisure.  Each  representative  counted  on  a  quiet  chat  with 
the  manager,  a  discreet  effort  to  learn  what  other  bids  were  in 
and  an  offer  calculated  to  secure  the  order  with  the  least  possible 
sacrifice  of  profits. 

On  the  appointed  day,  however,  the  last  of  the  four  had  arrived 
before  the  first  comer  was  admitted  to  conference.    While  wait- 


54 PURCHASING   METHODS 

ing,  therefore,  each  went  over  his  bid  carefully.  He  revised  his 
figures  wherever  he  had  been  liberal  in  his  estimating  and  also 
shaved  the  margin  of  profit  all  he  dared  to.  Each  knew  the 
thorough  reliability  of  his  competitors  and  the  exactness  of  the 
specifications  as  to  materials,  workmanship  and  time  of  delivery. 
All  saw  that  price,  based  upon  economical  facilities  and  good 
organization,  must  win. 

In  a  few  minutes,  the  first  man  to  enter  emerged  with  a  broad 
smile.  Much  to  his  surprise,  the  manager  had  accepted  his  tender 
and  signed  the  contract  on  the  spot.  Though  his  figures  were 
less  than  the  successful  bid  on  the  one  boat  previously  built, 
still  he  could  not  quite  understand  why  he  had  received  the 
order  before  his  competitors  were  heard.  He  could  scarcely 
credit  his  good  fortune. 

So  the  other  three  in  turn  were  admitted  to  audience,  and  as 
each  reappeared  with  a  well-satisfied  expression,  the  others  went 
over  their  bids  still  more  carefully. 

That  more  than  two  boats  were  contemplated  did  not  enter 
their  minds.  Had  it  done  so,  the  temptation  would  have  been 
strong  to  collude,  so  that  each  could  carry  away  an  order  for  at 
least  one  boat  at  a  good  price.  But  all  felt  that  two  of  the  four 
must  go  away  without  business,  and  each  was  determined  not  to 
be  one  of  the  two.  "When  the  last  one  had  his  tender  accepted, 
he  was  at  a  loss  to  understand  the  elation  of  the  first  three. 

Next  day  came  revelation.  All  four  had  won.  The  ore  line 
had  ordered  eight  boats  instead  of  two,  and  had  bought  them  for 
several  thousand  dollars  below  the  previous  level  of  prices.  But 
the  manager  had  done  much  more :  by  committing  the  company 
only  to  a  two-boat  program,  he  had  placed  an  order  taxing  the 
capacity  of  all  the  yards  without  paying  a  premium  to  any.  Had 
the  least  hint  reached  the  builders  that  there  was  work  for  all, 
the  revision  of  prices  might  have  been  just  as  vigorous,  but 
upward. 

Here  was  business  strategy  in  the  concrete — an  instance  where 
grasp  of  all  the  elements  of  a  problem  enabled  one  man  to  keep 
the  transaction  on  a  basis  of  fair  competitive  prices  in  spite  of 
conditions  that  favored  a  salesman's  market.  The  manager's 
plan  had  knowledge  for  its  basis — carefully  correlated  facts  bear- 
ing on  the  equipment  and  capacity  of  the  various  yards,  the 


To  insuie  against  production  difficulties  in  factories  which  are  sources  of  supply  and  against  delays 
in  transportation,  calls  for  reserve  stores  at  all  tinies.  Wheels  ready  for  assemblage  at  the  Ford  plant 
are  shown  at  the  top.  Precautions  against  deterioration  of  stores  is  illustrated  in  the  dry  vault  for 
tire  storage  at  the  Jeffrey  plant,  where  a  uniform  temperature  of  50  to  55  degrees  is  maintained 


Scientific  management  investigators  like  to  begin  in  the  stores  department  for  which  the  darkest 

corner  in  the  plant  has  often  been  selected  and  where  only  a  long  memory  can  locate  stores.     How 

these  methods  are  passing  is  indicated  by  the  labels  in  the  storeroom  (top)  at  the  Vulcan  Iron  Works, 

and  by  the  light,  ventilated  storeroom  (below)  material  at  the  George  M.  Pierce  Company 


CLOSING  THE   BARGAIN 57 

customs  and  precedents  of  the  trade  which  guided  action,  the 
very  temperaments  and  habits  of  thought  of  the  different  man- 
agers. He  had  studied  the  situation  from  their  viewpoint  as 
well  as  his  own.  Against  the  company's  immediate  needs  and  the 
sky-rocket  effect  an  eight-boat  program  would  have  on  the  market, 
he  balanced  the  fact  that  no  order  of  such  size  had  ever  before 
been  placed,  and  the  certainty  that  the  builders,  asked  for  figures 
on  two  boats,  would  assume  that  only  two  were  to  be  constructed. 
On  two  steamers  they  would  compete;  on  eight,  combine.  The 
essential  thing,  therefore,  was  to  keep  secret  the  company 's  desire 
for  a  fleet,  and  prevent  the  builders  from  comparing  notes  until 
all  the  contracts  had  been  signed. 

This  was  million-dollar  strategy  directed  towards  a  specific 
and  immediate  end.  Once  employed,  its  usefulness  in  exactly 
the  same  form  was  ended  j  but  the  method,  the  underlying  strat- 
egy, can  be  applied  in  the  conduct  of  the  smallest  factory.  The 
more  successful  an  individual  organization,  the  more  certain  it  is 
that  analysis  will  discover  in  the  management  the  exercise  of  this 
generalship  in  policies  and  campaigns,  in  swift  "strokes  of 
luck"  or  dazzling  "inspirations"  which  may  have  been  planned 
months  before. 

The  idea  behind  this  plan  is  of  universal  application;  it  is 
to  find  and  build  up  sources  of  supply  by  fair  prices  and  con- 
tracts, but  to  protect  your  firm  at  the  same  time  against  prices 
that  are  based  on  the  stringency  of  demand  rather  than  costs. 
Such  buying  also  benefits  the  supplier.  It  sharpens  his  wits  in 
devising  new  economies  in  manufacture  and  so  promotes 
efficiency. 

Coal  is  raw  material  for  the  Commonwealth  Edison  Company. 
For  several  years  "screenings"  have  been  in  exclusive  use.  The 
development  of  the  automatic  stoker  made  it  practical  to  burn 
this  fuel,  which  formerly  had  been  a  worthless  by-product  in 
the  production  of  lump  coal.  Its  adoption  by  several  large  com- 
panies in  the  Chicago  field  naturally  gave  it  a  substantial  market 
value.  At  that  time  little  coal  was  purchased  from  the  mine 
direct.  Jobbers  controlled  the  mine  output  and  their  habit  was 
to  ship  th«  coal  into  Chicago  and  then  hustle  around  to  find 
takers.  The  entry  into  the  market  for  screenings  of  so  many 
big  companies  prompted  a  coalition  among  the  jobbers  to  control 


58 PURCHASING  METHODS 

the  prices.  The  purchasing  agent  of  the  Edison  Company  was 
among  those  caught  the  first  time.  That  winter,  however,  ha 
laid  in  a  heavy  reserve  supply,  as  in  the  cold  season  the  pro- 
duction of  screenings  is  considerably  in  excess  of  the  demand 
and  they  sometimes  can  be  bought  for  the  freight  charges.  This 
supply  he  used  throughout  the  ensuing  year  as  a  leverage  to 
bring  the  jobbers  to  time. 

Counting  on  the  Edison  Company's  steady  requirements  they 
continued  to  ship  in  so  many  carloads  a  day.  The  purchasing 
agent  refused  to  buy  for  several  days  and  meanwhile  the  demur- 
rage charges  piled  up  on  the  jobbers.  Finally,  when  they  were 
willing  to  sell  at  any  reasonable  price  in  order  to  avoid  further 
loss,  he  began  to  buy  again.  Although  the  Edison  Company  now 
contract  for  their  coal  by  the  year  directly  with  the  operators, 
and  buy  of  the  jobbers  only  when  they  can  better  the  contract 
price,  they  still  accumulate  a  large  reserve  when  the  price  is  at 
rock-bottom.  But  they  do  so  for  a  different  reason  mainly.  Of 
course,  a  reserve  is  always  a  protection  against  an  unforeseen 
interruption  of  the  supply.  To  lower  the  yearly  average  price 
of  the  coal  is,  however,  the  principal  reason.  Moreover,  it  is  still 
a  protection  against  conditions  that  favor  the  jobbers  in  case 
they  have  to  supplement  their  regular  supply  at  any  time. 

HOW  FAR  TO  TAKE  ADVANTAGE  OF  LOW  MARKETS 
AND  WHEN  TO  PASS  AROUND  SUCCESS 

IN  another  case,  a  firm  had  inquiries  out  for  a  thousand  tons 
of  special,  gray  iron  castings — a  most  desirable  order.  Several 
representatives  appeared  in  person  and  many  other  bids  were 
received  by  mail.  The  bids  were  low  in  price,  but  the  buyer  was 
not  satisfied.  In  conversation  with  one  of  the  bidders  who  was 
out  on  the  question  of  delivery,  he  learned  that  one  foundry  had 
no  work  ahead  and  was  anxious  for  the  contract.  Their  bid  was 
in  and  was  one  of  the  low  ones.  The  representative  explained 
that,  casting  prices  being  made  up  of  cost  of  material,  freight, 
labor  cost,  overhead  charges,  and  profit,  the  last  two  were  the 
only  ones  which  could  be  cut.  He  also  said  that  the  times 
being  so  bad  nearly  all  the  foundries  had  cut  the  profit  to  little 
or  nothing.  He  intimated  that  his  foundry,  rather  than  lose  the 
order,  might  be  willing  to  cut  its  profit  to  almost  nothing.    A 


CLOSING  THE   BARGAIN 59 

wire  was  sent  offering  them  the  contract  at  $1  per  ton  under  their 
bid.    This  was  accepted,  making  a  saving  of  one  thousand  dollars. 

Just  how  far  a  firm  is  justified  in  taking  advantage  of  a  sup- 
plier's stringency  to  exact  an  unusual  price  concession,  is  debata- 
ble. If  the  supplier  loses  money  on  your  order,  he  is  fairly  sure 
to  exact  a  double  profit  when  he  gets  you  at  a  disadvantage. 
That  a  number  of  large  manufacturers  have  adopted  the  policy 
of  buying  on  a  cost-plus-a-percentage  basis  or  of  seeing  to  it 
that  no  supplier  handles  their  business  at  a  loss  would  indicate 
that  they  believe  it  to  be  more  just,  and  in  the  long  run  more 
profitable,  to  "pass  around  success." 

Large  companies,  dependent  as  they  often  are  on  a  few  suppliers 
for  some  material  which  they  consume  in  enormous  quantities, 
are  at  a  disadvantage.  The  buyer  must,  therefore,  exercise  the 
utmost  vigilance  and  foresight.  He  faces  a  practical  monopoly, 
and  only  by  the  keenest  kind  of  generalship  can  he  keep  the 
scale  even.  Small  companies  are  in  a  better  position  because  with 
any  single  commodity,  one  of  several  competing  concerns  can 
meet  their  entire  requirements.  If  a  large  company  can  develop 
one  source  of  supply  to  the  point  where  this  alone  is  sufficient,  it 
then  has  a  peculiar  advantage,  provided  there  is  sufficient  possi- 
ble competition  to  keep  the  favored  supplier  appreciative.  Oth- 
erwise, the  development  of  a  proprietary  source  may  be  the  only 
way  out. 

HOW  TO  DEVELOP  COOPERATION  IN  DEALING 
WITH  AGENTS  AND  SALESMEN 

T>  ULKING  purchases  with  one  or  a  few  suppliers  is  the  modern 
tendency  in  purchasing.  This  policy  has  many  advantages. 
When  there  are  fewer  firms  to  deal  with  and  fewer  salesmen  to 
see,  more  intimate  relations  can  be  built  up,  better  prices  secured 
and  purchasing  expense  reduced.  However,  like  all  moves  in  the 
right  direction,  this  one  can  easily  be  carried  too  far.  The 
favored  suppliers,  presuming  on  your  good  will,  may  after  a 
time  grow  careless.  Moreover,  some  of  them  may  be  outdistanced 
by  competitors  whom  you  do  not  recognize.  Thus  by  adhering 
too  tenaciously  to  a  policy  of  concentrating  your  purchases,  you 
may  presently  find  yourself  paying  a  higher  price  for  an  inferior 
article  and  have  lower  service  to  boot. 


PURCHASING  METHODS 


No  matter  how  reliable  a  firm  is  today,  next  year  or  the  year 
after  developments  and  changes  in  the  market  may  have  trans- 
ferred the  greater  reliability  elsewhere.  So  it  does  not  pay  to 
become  too  firmly  committed  to  any  one  source.  Divide  up  your 
business  just  enough  so  that  the  favored  supplier  will  be  kept 
constantly  appreciative.  Let  him  plainly  understand  that  you 
patronize  him  because  it  is  to  your  advantage  and  never  hesitate 
to  shift  your  favor  if  you  find  another  firm  more  worthy  of  it. 
The  guiding  principle  is  to  keep  your  buying  on  a  merit  basis 
strictly. 

This  does  not  mean  that  friendly  relations  with  the  trade  are  to 
be  discouraged.  Some  buyers  fear  that  the  development  of 
friends  among  salesmen  will  lead  to  conditions  unfavorable  to 
businesslike  buying.  This  is  far  from  the  actual  fact.  A  wide 
acquaintance  is  as  valuable  to  the  buyer  as  to  the  salesman.  The 
buyer  with  many  friends  among  salesmen  is  not  apt  to  be  unduly 
influenced  by  any  one  man's  personality.  The  one  who  has  few 
friends,  however,  is  much  more  likely,  in  a  weak  moment,  to  let  a 
strong  personality  dominate  him  to  the  point  of  closing  an  un- 
profitable deal.  Wide  acquaintance  and  a  regular  practice  of 
keeping  in  touch  with  the  representatives  of  all  potential  sources 
are  the  surest  methods  of  avoiding  the  pitfalls  of  personal 
favoritism. 

' '  A  purchasing  agent  may  add  to  his  buying  staff  every  sales- 
man who  calls  on  him  if  he  will  take  the  initiative  and  handle 
his  work  on  that  basis,"  says  a  buyer  known  for  his  ability  in 
finding  and  bargaining  for  what  his  house  wants.  "Yet  every  so 
often  one  meets  a  buyer  whose  business  it  is  to  spend  his  em- 
ployer's money  to  the  best  possible  advantage,  but  who  feels  that 
he  can  serve  this  end  by  being  a  human  icicle  and  frowning  on 
the  salesmen  who  call  on  him. ' ' 

Moreover  many  a  buyer  has  been  caught  in  an  emergency  and 
made  to  pay  dearly  for  his  lack  of  courtesy,  when,  if  the  sales- 
man had  been  treated  with  decent  respect,  he  would  have 
helped  the  buyer  out  of  his  trouble  with  reasonable  prices  and 
quick  deliveries. 

A  salesman  representing  a  jobber  who  carried  a  stock  of  mer- 
chant steel  had  called  several  times  on  a  self -sufficient,  "busy" 
purchasing  agent,  whose  factory  required  sheets  in  large  quan- 


CLOSING  THE  BARGAIN 


61 


tities.  This  buyer  made  all  of  his  purchases  from  the  mills  in 
carload  lots  and  evidently  felt  that  he  would  never  need  de- 
liveries from  stock.  For  this  reason,  probably,  he  had  treated 
the  salesman  brusquely.  But  one  morning  the  jobber's  man, 
while  waiting  in  the  outer  office  for  an  interview  overheard  a 
remark  which  showed  him  that  the  buyer  was  in  a  tight  place. 
Three  carloads  of  sheets  had  been  lost  in  the  floods  in  Indiana 
and  the  mill  would  have  to  shut  down  unless  another  supply 
could  be  found. 

When  the  salesman  entered,  therefore,  he  found  a  very  pleas- 
ant reception  awaiting  him.  He  had  nearly  a  carload  of  the  size 
of  sheets  required.    He  sold  them,  but  at  a  price  so  far  above 


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FORMS  III-V:  Prices  and  terms  are  recorded  from  the  invoices.  The  rest  of  the  data  is  added 
i.artly  from  the  purchase  order  and  partly  from  the  material-purchase  record  (Form  II).  When  any 
item  is  discontinued,  the  card  covering  it  is  placed  in  a  "dead"  file,  for  future  reference,  if  necessary 


the  market  that  he  felt  called  upon  frankly  to  explain  the  reason. 
The  buyer  learned  his  lesson  and  treated  this  particular  man 
in  a  different  manner  thereafter. 

Courtesy   in  the   handling  of   salesmen   naturally   develops 


62 PURCHASING   METHODS ___ 

cooperation.  A  man  who  sells  a  line  of  material  is  thoroughly 
familiar  with  it  and  can  help  the  buyer  in  many  ways.  In 
addition,  he  is  able,  through  his  rubbing  against  salesmen  in 
other  lines,  to  know  much  about  other  men's  business.  The 
representative  of  a  paint  house  discovered  that  one  of  his  cus- 
tomers bought  largely  of  black  iron  wire  from  the  mills  in 
standard  length  coils.  This  was  afterward  cut  into  short  lengths 
for  use.  The  salesman  learned  that  a  certain  mail-order  house 
bought  short  ends  from  the  same  mills,  fifty  or  a  hundred  feet 
long,  put  them  up  in  hundred  pound  coils  and  sold  them  at 
approximately  half  the  market  price.  He  told  the  buyer  of  this, 
who  thereby  saved  many  hundred  dollars  yearly  on  his  wire. 

It  may  be  laid  down  as  a  safe  rule  that  it  pays  to  get 
on  personal  ground  with  those  with  whom  you  do  business. 
There  are  always  advantages  to  be  gained  by  such  a  policy. 
It  is  the  surest  way  of  learning  trade  customs.  It  gives  one  a 
broad  outlook  on  general  business  conditions,  and  on  practical 
factors  affecting  business.  Credit  information  may  be  gathered 
in  this  way.  A  salesman  is  always  anxious  to  get  a  prospective 
buyer  favorably  disposed  to  him,  if  the  buyer  shows  a  human 
side.  A  friendly  salesman,  too,  is  a  valuable  help  in  getting 
action  from  his  house  in  case  of  emergencies,  slow  deliveries  or 
adjustments  of  any  kind. 

One  buyer  through  an  error  in  his  factory,  ordered  nearly 
twice  as  much  special  machinery  as  he  needed.  A  wire  sum- 
moning the  salesman  from  whom  he  had  purchased  brought  the 
information  that  the  special  patterns  had  been  made  and  the 
castings  poured.  The  castings  could  be  melted  up  again,  but  the 
labor  on  them  amounted  to  about  $500.  This  buyer  had  won 
the  friendship  of  the  salesman,  had  helped  him  in  getting  other 
jobs  and  now  asked  him  outright  for  assistance  in  getting  out 
of  the  hole.  Just  what  argument  the  salesman  used  on  his  house, 
is  not  known,  but  the  superfluous  part  of  the  order  was  cancelled 
without  cost  to  the  buyer. 

A  requisition  for  a  small  quantity  of  wire  rope  of  special  con- 
struction in  another  instance  was  misplaced  in  the  purchasing 
department  and  came  to  light  only  a  few  days  before  the  machine 
on  which  it  was  to  be  used  was  to  be  shipped.  The  case  looked 
hopeless,  but  the  buyer  had  cultivated  the  salesman  of  the  cable 


CLOSING  THE   BARGAIN 63 

house  which  supplied  him.  He  told  his  trouble  to  this  man  over 
long  distance  and  on  the  day  it  was  required  the  material  was 
on  hand.  The  salesman  had  gone  personally  to  the  mill,  had 
had  the  rope  machines  set  especially  for  this  job  and  the  one 
hundred  and  fifty  feet  of  rope  was  billed  at  the  regular  price. 

Generally  speaking,  however,  it  is  not  safe  to  rely  unduly  on 
the  good  will  of  salesmen  and  suppliers.  Though  a  highly  desir- 
able adjunct,  cordial  relations  with  the  trade  are  not  a  substitute 
for  thorough  preparation.  In  the  first  place,  the  buyer  must 
have  plenty  of  time  in  which  to  secure  competitive  bids  and  be 
assured  of  his  sources  if  he  is  to  get  both  price  and  service.  If 
he  has  to  buy  on  short  notice  he  cannot  usually  go  to  the  mill 
or  factory  direct,  but  must  do  the  best  he  can  with  jobbers.  He 
should,  moreover,  have  his  lists  of  possible  sources  handy  for 
reference  and  replete  with  purchasing  facts,  indicating  a  record 
of  past  performances.  Then  he  is  fortified  to  secure  reliable 
quotations  promptly. 

To  fortify  the  buyer  as  strongly  as  possible  in  this  respect,  the 
A.  B.  Farquhar  Company  maintain  card  index  records  of  every 
item  purchased  (Forms  III,  IV  and  V).  One  subject  only 
appears  on  a  card.  Net  prices  or  discounts,  terms,  sizes,  grades, 
mill  or  stock  shipment,  sketches,  a  list  of  suppliers  for  the  item 
in  question — all  are  given.  Quotations  for  future  consideration 
may  be  entered  in  red  ink.  The  names  of  the  suppliers  appear 
only  on  the  back.  Each  is  given  a  number  and  this  is  used  to 
key  the  information  on  the  front  face.  Space  is  thus  saved  on 
the  front  and  also  the  combination  of  price  and  seller  prevented 
from  becoming  known  should  the  card  be  exposed  to  the  view  of 
any  interested  person.  Except  in  the  case  of  special  articles 
manufactured  or  sold  by  only  one  firm,  the  information  on  these 
cards  keeps  on  expanding  as  new  competition  enters  the  field. 
The  "other  fellow"  is  always  given  a  chance  to  quote,  and  in 
time  his  name  will  be  added  to  the  list. 

Summed  up,  getting  price  and  service  is  no  more  than  know- 
ing and  planning — knowing  more  than  the  other  fellow  and 
basing  on  this  information  a  definite  program  or  policy  calcu- 
lated to  accomplish  a  certain  result. 

Knowledge  of  your  own  business  is  the  first  requisite — its 
needs,  its  resources,  its  present  possibilities,  the  opportunities  or 


64 PURCHASING   METHODS • 

perils  which  the  future  or  an  untried  field  may  hold  for  it. 
Analysis  of  trade  and  market  conditions  comes  second,  coupled 
with  the  study  of  the  personal  equation  in  each  case,  the  other 
fellow's  side  of  the  question  and  the  personal  traits  of  sales 
representatives  whose  friendship  may  save  you  in  an  emergency. 
Finally,  plans.  Plans  based  on  these  correlated  facts — a  pro- 
gram employing  every  important  resource,  missing  no  fortuitous 
chance,  betraying  no  vulnerable  spot,  safeguarding  the  future 
while  seizing  the  current  advantage,  capitalizing  advantages  in 
which  both  source  and  purchaser  will  share,  keeping  always  a 
move  ahead  of  the  absolute  requirements  of  your  plant. 


VII 

RECEIVING  AND  INSPECTING 
PURCHASES 


SHORTAGES  of  supplies  and  materials,  the  blind  search  for 
mislaid  items  and  the  delays  that  result  from  the  loss  of 
invoices  characterize  the  ill-managed  receiving  department. 
These  difficulties  often  interfere  with  production  and  make  the 
collection  of  claims  for  damage  to  goods  in  transit,  as  well  as 
the  correction  of  the  supplier's  mistakes  in  count,  weight  and 
quality,  all  serious  matters.  To  avoid  the  resultant  losses  correct 
checking  when  the  goods  come  in  and  quick,  accurate  distribu- 
tion of  the  goods  to  the  proper  departments  are  necessary. 

Something  more  than  counting,  measuring  and  weighing,  how- 
ever, is  involved  in  the  receiving  of  goods.  Lumber  may  meet  the 
specifications  as  to  length,  width  and  thickness,  but  yet  prove  a 
baffling  problem  as  to  inspection  for  knots,  uniformity  of  grain 
and  the  other  points  where  a  difference  of  opinion  so  often  comes 
up  in  grading.  Ore,  leather,  steel,  chemicals,  clay,  similarly 
call  for  the  services  of  the  physicist  and  chemist  to  back  judg- 
ment with  laboratory  evidence. 

In  providing  for  incoming  shipments  the  first  thing  to  do  is 
to  arrange  for  the  delivery  of  materials  through  one  inlet ;  then 
to  weigh,  measure  or  count  and  carefully  inspect  for  defects, 
each  lot  as  received ;  and  to  record  the  details  of  the  inspection 
for  use  by  the  auditor  in  paying  bills,  the  cost  department  in 
accounting  for  the  disposition  of  the  materials  charged  to  the 
shop,  and  the  production  department  in  putting  the  articles 
into  immediate  use.  A  blank  (Form  VI)  commonly  used  for  this 
purpose  is  made  in  triplicate.  One  copy  goes  to  the  cost  clerk 
for  attachment  to  the  invoice  when  received,  one  to  the  pro- 


PURCHASING   METHODS 


duction  department  as  notice  that  the  material  is  ready  for 
use,  and  the  third  is  numbered  serially  and  kept  on  file  by  the 
receiving  clerk  to  assist  in  discovering  stray  articles  received 
without  prompt  advices.  Having  checked  in  the  articles,  each 
lot  is  promptly  to  be  put  in  its  proper  place,  regarding  which 
the  system  should  be  so  good  that  there  is  no  doubt  nor  hesitation 
as  to  where  it  should  go. 

The  purchasing  agent  keeps  tab  on  deliveries  by  filing  a  copy 
of  the  requisition  for  supplies  in  a  date  "tickler"  under  the 
expected  invoice  date  of  the  item  called  for  earliest,  and  noting 
this  date  on  a  record  copy  of  the  purchasing  order.  Each  day 
the  removal  of  the  front  card  shows  up  the  requisitions  for 
articles,  invoices  for  which  should  be  received  that  day.  Ac- 
cording to  requirements,  the  sellers  may  be  written  or  tele- 
graphed, allowed  a  day's  grace,  called  on  to  delay  shipment,  or 
left  to  their  own  time.  Invoices  received  are  delivered  first  to 
the  purchasing  agent  to  check  prices  and  discounts,  and  to  remove 
from  his  "tickler"  the  corresponding  requisition.  In  case  of  a 
shipment  far  ahead  of  the  expected  date,  the  requisition  may 
readily  be  located  by  the  date  of  shipment  expected,  as  entered 
on  the  order  copy,  which  is  already  at  hand  to  check  the  prices. 
With  the  checking  of  the  invoice,  and  the  entering  of  the  price 
details  on  order  record  book  or  order  copy,  the  purchasing  agent's 
work  on  the  particular  transaction  is  ended. 

From  the  purchasing  agent  the  invoice  goes  direct  to  the 
cost  clerk,  where  the  receiving  memorandum  is  attached  as 
soon  as  it  comes  in,  and  the  total  net  price,  including  freight 
and  miscellaneous  charges,  is  entered  on  the  material  inventory 
ledger,  or,  if  separate  inventory  cards  kept  in  the  stock-room 
are  used,  in  a  material  price  book.  This  price  is  made  fractionally 
higher,  sufficiently  to  take  care  of  odd  cent  fractions,  or  to  cover 
shrinkage  in  substance  where  it  occurs,  but  not  enough  to  expect 
a  profit  in  the  material  account.  In  case  of  articles  like  small 
screws,  it  is  necessary  to  carry  price-sheets  for  lots  of  one  up 
to  a  dozen  or  more,  to  facilitate  calculation  in  cent  fractions. 
In  large  works  it  is  often  desirable  to  require  invoices  in  dupli- 
cate, so  that  one  may  always  remain  in  the  treasurer's  office  for 
reference,  while  the  duplicate  goes  the  rounds.     Having  taken 


RECEIVING  AND  INSPECTION 


67 


off  his  records,  the  cost  clerk  sends  the  invoice  to  the  treasurer, 
with  the  receiving  memorandum  attached. 

In-shipments  under  the  foregoing  system  all  must  pass 
through  one  inlet.  Another  concern,  however,  has  developed  a 
very  efficient  system  under  which  goods  are  checked  in  and 
reported  by  each  department.     Shippers  in  the  first  place  are 


No.  2537 

Receiving  Memorandu 

Covering  One  Shipment  Only 

m 

flat"                              19    , 

Quantity 

Size 

Description 

for 

Delivered  to 

_ _ 

„ 

— - — 



*"» 

Via 

Cha 

FORM  VI:     A  receiving  memorandum  on  which  is  noted  the  receipt  of  one  shipment  only  with 
data  concerning  its  quantity,  size,  description,  supplier,  route,  charges,  and  the  name  of  the  depart- 
ment in  which  it  is  to  be  used,  is  here  shown 


requested  to  make  out  their  invoices  in  triplicate,  mailing  them 
direct  to  the  purchasing  department.  When  they  are  received 
here,  the  items  on  the  invoice  are  entered  in  a  book  properly 
ruled  for  that  purpose,  showing  the  number  of  the  requisi- 
tion for  which  the  goods  were  ordered,  the  department  they 
are  intended  for,  the  date,  from  whom  they  are  received,  terms 
of  purchase,  how  shipped,  and  if  by  car,  the  car  number. 
If  the  bill  provides  for  a  discount,  it  is  so  stamped.  The  same 
stamp  shows  also  the  date  of  maturity.  Every  invoice  is  given  a 
distinguishing  number  which  is  entered  in  the  record  book.  At 
the  same  time  the  requisition  is  checked  and  the  price  marked 
"0.  K." 

If  three  copies  of  the  invoice  are  received  at  the  purchasing 
department,  they  are  forwarded  to  the  auditing  department  as 
soon  as  the  above  information  has  been  recorded. 

In  some  instances,  however,  shippers  may  neglect  to  send 


PURCHASING   METHODS 


more  than  one  copy,  in  which  case  the  two  duplicates  should  be 
made  in  the  purchasing  department.  It  may  seem  more  desirable 
always  to  make  the  duplicates  here,  and  if  such  is  the  case  it  may 
be  a  convenient  scheme  to  copy  discount  bills  on  colored  paper, 
so  that  they  will  attract  attention  in  the  auditing  department 
and  insure  payment  before  maturity. 

When  the  three  invoices  are  received  by  the  auditing  depart- 
ment, the  extensions  are  carefully  examined,  and  the  amounts 
recorded.  Then  one  copy  is  sent  to  the  department  receiving  the 
goods,  one  to  the  storekeeper,  and  one  is  retained  by  the  auditor. 

When  the  goods  specified  on  the  invoice  are  received  by  the 
proper  department,  the  department  head  signs  a  report  or  receipt 
for  the  goods,  attaches  to  it  the  invoice,  and  thus  approves  both 
at  the  same  time.  If  there  are  any  discrepancies  between  the 
report  and  the  invoice,  he  makes  a  note  to  this  effect  on  one  of 
them.  In  either  case  he  forwards  the  report,  with  invoice  at- 
tached, to  the  storekeeper.  Upon  receipt  of  this  the  latter 
attaches  to  the  report  of  the  department  head  his  own  copy  of 
the  invoice,  and  places  it  in  a  file.  The  approved  invoice  from 
the  department  he  returns  to  the  auditor.  The  original  invoice, 
it  will  be  remembered,  has  never  left  the  auditing  department, 
but  the  duplicates  have  been  the  means  of  securing  the  informa- 
tion requisite  to  the  payment  of  the  bill.  The  wisdom  of  giving 
the  invoice  a  distinguishing  number  when  it  first  arrives  in  the 
purchasing  department  is  evident,  as  identifying  it  completely 
from  any  other  invoice  of  the  same  date,  commodity  and  shipper. 
With  the  invoice  fully  approved  the  auditor  notifies  the  pur- 
chasing agent  that  ' '  Invoice  No from    Amount 

has  been  paid  this  date,  voucher  No "    Thus  a  triple 

check  on  all  outstanding  invoices  is  completed. 

HOW  TO  MAKE  REPORTS  ON  GOODS  WHEN 
THEY  ENTER  THE  PLANT 

\\fHILE  this  system  assures  prompt  and  accurate  dealing 
among  all  the  departments  handling  the  invoice,  an  im- 
portant incidental  step  in  the  receiving  of  in-shipments  is  the 
making  of  reports  when  goods  first  enter  the  plant.  In  large 
concerns  this  may  best  be  handled  by  having  at  the  storeroom 
where  the  loaded  wagons  first  enter,  a  pad  of  consecutively 


RECEIVING  AND   INSPECTION 


69 


numbered  report  blanks.  As  the  wagon  enters,  the  sub-store- 
keeper records  on  one  of  these  blanks  the  contents  of  the  load, 
weighs  the  load  if  necessary,  gives  the  report  to  the  driver,  and 
directs  him  to  the  proper  department.  The  sub-storekeeper 
retains  a  carbon  copy  of  this  report  at  the  storeroom,  and  by 


Received  from 

GOODS  RECEIVED  RECORD 

AnMress . 

IrfiTransnortatfon  Charms 

Hate  Rfinp.ivHfl                   „ ,                                              Time  Received 

Amount 
Received 

Description  of  Goods 

Received  by 

Checked  Yn  Stock  hv                        Entered  on  Records  bv 

FORM  VII:    Records  of  goods  received,  when  conscientiously  kept,  have  considerable  practical 

value.    This  form  is  used  when  the  shipping  department  also  acts  as  a  receiving  department.     It  is 

made  out  in  duplicate,  the  carbon  being  retained  and  the  original  attached  to  the  goods  and  sent  to 

the  stock-room 


comparing  these  occasionally  with  the  reports  which  have  been 
returned  with  approved  invoices,  an  additional  check  is  available. 

Shipments  arriving  in  carload  lots  are  received  by  a  single 
clerk,  who  reports  the  contents  of  the  entire  car,  assigns  to  each 
department  the  material  belonging  to  it,  and  demands,  of  course, 
a  receipt  to  assure  his  own  protection.  The  reports  being  con- 
secutively numbered  afford  a  check  upon  the  receiving  clerks, 
and  any  soiled  or  cancelled  blanks  must  be  turned  in  to  complete 
the  records. 

Except  in  the  large  organizations,  it  is  perhaps  customary  to 
have  the  receiving  and  shipping  done  by  the  shipping  department. 
In  such  cases  the  shipping  department  simply  makes  out  a  goods- 
received  ticket  (Form  VII)  in  duplicate,  showing  the  number  of 


70 PURCHASING   METHODS _ 

boxes,  barrels  and  crates  received.  The  duplicate  copy  should  in 
all  cases  be  retained  by  the  shipping  department  and  filed  accord- 
ing to  the  date  the  goods  are  received,  or  alphabetically  ac- 
cording to  the  name  of  the  concern  from  which  the  goods  were 
obtained.  Such  a  routine  will  insure  in  all  cases  a  correct  record 
of  receipt.  The  original  should  be  sent  to  the  proper  stock-room 
or  department,  attached  to  the  goods. 

With  this  arrangement  the  goods  are  not  opened  in  the  shipping 
department.  Their  receipt  is  merely  evidenced  by  the  clerk 
when  he  makes  out  a  goods-received  ticket. 

This  plan  as  outlined  has  three  excellent  features : 

(1)  Inasmuch  as  all  goods  would  necessarily  have  to  be  veri- 
fied after  reaching  the  stock-room,  by  counting  and  checking,  the 
same  operation  in  the  receiving  department  amounts  to  an  exact 
duplication  of  work  with  the  additional  cost  of  labor  involved. 

(2)  The  opening  of  goods  in  the  shipping  department  would 
require  additional  floor  space  and  benches,  which  is  duplicated 
in  the  stock-room. 

(3)  Goods  if  opened  in  the  shipping  department  are  more 
liable  to  be  stolen  in  transit  to  the  stock-rooms. 

One  particular  advantage  gained  by  maintaining  a  regular 
receiving  department  where  goods  are  inspected,  counted  and 
weighed  as  soon  as  received  is  that  it  furnishes  an  additional 
check  on  receipts.  In  cases  of  disputes  with  outside  concerns  as 
to  amounts  delivered,  the  records  of  this  department  furnish  the 
most  reliable  evidence  that  reasonably  can  be  obtained.  This 
plan  also  satisfies  the  management  that  goods  received  are  being 
properly  accounted  for  by  two  distinct  departments.  In  the  last 
analysis  too  much  cannot  be  said  for  the  double  check,  when  its 
cost  of  maintenance  is  not  out  of  proportion  to  its  value. 

"Where  a  regular  receiving  department  is  maintained,  and 
especially  in  large  plants  where  there  are  many  different  stock- 
rooms and  large  quantities  of  special  goods  handled,  that  depart- 
ment ought  to  be  furnished  with  a  copy  of  every  purchase  order 
issued,  showing  by  whom  goods  are  ordered.  This  is  filed  alpha- 
betically according  to  name  of  requisitioner  so  that  the  goods 
may  be  forwarded  without  loss  of  time  to  the  stock-room  ordering 
them. 

By  using  strip  carbon  paper  everything  specified  on  a  pur- 


RECEIVING   AND   INSPECTION 71 

chase  order  may  be  copied  on  a  duplicate  order  except  the  quan- 
tity and  price.  Since  neither  of  these  items  concern  the  receiv- 
ing department  directly,  it  is  generally  held  that  they  should 
be  omitted.  However,  some  managers  contend  that  it  is  a  better 
policy  to  insert  quantity  and  price  in  the  copy  for  the  receiving 
clerk. 

An  excellent  plan  to  accomplish  this  is  to  make  the  copies 
furnished  the  receiving  department  serve  as  goods  received 
tickets  but  leave  the  date  received  and  the  quantities  to  be  filled 
in  by  them.  This  eliminates  entirely  the  extra  labor  and  expense 
of  making  them  out  in  their  entirety  in  the  receiving  depart- 
ment. 


VIII 

PURCHASE  FORMS  AND 
SYSTEMS 


SALESMEN  spoke  of  a  certain  purchasing  agent  as  a  shrewd 
buyer.  On  being  questioned  in  this  direction  he  attributed 
his  reputation  for  "shrewdness"  to  the  diligent  use  of  a 
purchasing  quotation  record  (Form  VIII),  which  carries  on  one 
card  all  the  essential  details  of  quotations  from  various  sup- 
pliers upon  the  one  item  under  which  the  card  is  filed.  His 
usual  procedure,  whenever  a  quantity  of  anything  has  to  be 
bought,  is  to  write  letters  to  at  least  four  or  five  firms  requesting 
them  to  quote  and  as  their  figures  are  received  they  are  listed 
on  the  "Purchase-Quotation  Form."  "When  all  the  quotations 
are  in,  he  decides  who  shall  have  the  order,  at  the  same  time 
makes  an  entry  on  the  card  in  the  "Remarks"  column. 

After  the  transaction  is  completed,  this  card  is  moved  to  the 
"old  quotation  file,"  as  possibly  a  year  later  it  may  be  neces- 
sary to  solicit  prices  on  the  same  or  a  similar  article.  The  old 
records  will  then  prove  of  value  for  reference.  They  are  also 
valuable  because  of  the  lists  of  names  they  contain,  should  such 
a  list  of  sources  be  wanted  in  a  hurry  for  any  reason.  When  the 
average  purchasing  agent  gets  instruction  to  buy  something  a 
little  out  of  the  ordinary,  he  generally  spends  considerable  time 
in  getting  together  a  good  list  of  prospective  bidders.  Indeed, 
there  is  often  a  great  deal  of  labor  spent  in  finding  out  who 
makes  or  sells  certain  things. 

The  first  form  illustrated  is  used  for  taking  quotations  on 
staple  articles,  while  a  similar  one  (Form  IX)  comes  in  handy 
for  listing  prices  on  special  articles. 

When  the  prices  for  different  quantities  have  been  listed  in 


•si 


0  a 
5"S 


*n 

m 

in 

.S'lg 

8-^ 

§§S 

1°1 
-3  .1 

£  E  u 
g,  tj  o 


1*1 

III 

-S3 


If 


Mr'  "* 

';■■•'•  '        '    '.  •' 


While  the  commission  man  is  figuring  fewer  shifts  because  of  the  perishable  nature  of  fruit  and  produce, 

the  steel  mill  executive  is  making  an  effort  to  cut  costs  by  placing  in-shipments  strategically  in  the 

first  handling  from  the  car.     Pig  iron  is  stored  directly  at  the  left  of  the  charging  floor  and  scrap  is 

brought  directly  to  the  cupola  in  trucks  which  serve  also  as  storage  bins 


FORMS  AND   SYSTEMS 


75 


the  proper  column,  this  card  is  especially  valuable  for  comparing 
the  prices  from  different  firms,  quantity  for  quantity. 

Both  of  the  forms  illustrated  are  especially  handy  in  taking 
telephone  quotations,  since  the  headings  at  the  top  of  the  columns 
serve  as  reminders  of  the  vital  questions  that  must  be  answered. 
With  one  of  the  forms  in  front  of  him  when  he  is  getting  tele- 
phone quotations,  the  purchasing  agent  avoids  having  to  call  the 
seller  the  second  time  for  additional  information.    Nor  does  he 


ARTICLE                                   ^                     <L           //                                  QUANTITY 

DATE 

NAME  OF  FIRM 

ADDRESS 

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FORMS  VIII  and  IX:  One  purchasing  agent  records  quotations  on  staple  articles  on  the  upper  form, 

and  quotations  on  special  articles  on  the  lower  form.     Besides  forming  a  valuable  record,  these  cards 

act  as  an  order  on  the  stenographer  to  write  to  the  firms  listed  for  quotations 


get  figures  mixed  or  interchanged  as  he  did  when  he  tried  to 
keep  the  information  on  pieces  of  scrap  paper,  or  in  his  head. 

This  buyer  is  considered  shrewd,  not  because  of  any  marked 
degree  of  ability  in  comparison  with  other  buyers,  but  because 
he  is  systematic  in  his  work,  has  the  complete  history  of  every 
quotation  he  receives  at  his  fingers'  ends  and  also  because  he  is  a 
good  advertiser — that  is,  he  never  fails  to  let  the  salesmen  who 
call  on  him  know  that  he  is  taking  competitive  quotations. 

Only  when  the  hundreds  of  details  to  be  kept  track  of  in  con- 
nection with  prices,  sources  of  supply,  delivery  dates,  catalogs 


76 


PURCHASING  METHODS 


and  quotations  have  been  organized  into  a  carefully  planned 
system  of  record,  can  the  purchasing  agent  see  his  way.  Every 
buyer,  even  for  the  small  shop,  knows  that  the  detail  which 
it  seems  unavoidable  to  carry  in  mind  is  at  best  a  burden.    Still 


iHfm  print  «u>   Uttqwtt«. 


Sf2^ 


_p 


Mm  ;  |Qrt»»fri  ErtjpY 


m 


FORMS  X   and   XI:      When  the  buyer  receives  a  requisition  from  the  production  department, 

properly  authorized,  he  consults  his  records  and  sets  his  system  working  to  find  the  best  "buy." 

The  back  form  is  used  in  placing  orders.    Three  carbons  are  made,  but  the  "price  and  terms"  data 

appear  only  in  the  original 

more  vital  than  the  capacity  of  the  system  to  absorb  details, 
however,  is  its  audit  power;  it  must  guard  against  errors,  dis- 
honesty and  lack  of  judgment,  both  in  requisitioning  and  in 
buying. 

A  DEFINITE  POLICY  FOR  HANDLING  REQUISITIONS 
PREVENTS  LOSSES  AND  CONTROLS  WASTE 


/^\  TJESTIONS  of  policy  as  well  as  of  method  are  to  be  answered. 
^^  Where,  for  instance,  can  the  line  be  drawn  between  what 
requisitions  should  be  passed  for  purchase  immediately  and  those 
that  should  undergo  a  closer  scrutiny?  If  the  questioning 
becomes  so  rigid  that  a  foreman  hesitates  about  asking  for  things 
because  he  always  expects  to  be  turned  down,  many  profitable 
supplies  will  be  neglected.    On  the  other  hand,  if  every  request 


FORMS  AND   SYSTEMS 


71 


were  passed  without  comment,  the  abuse  of  the  privilege  would 
soon  become  a  source  of  great  expense  and  the  shop  would  be 
cluttered  with  worthless  articles. 

The  disposition  of  a  large  share  of  the  requisitions  can  be  left 
to  well-trained  subordinates,  who  should  be  capable  of  exercising 
satisfactory  judgment  in  the  matter  of  standard  supplies  and 
minor  replacements.  Moreover,  they  should  be  charged  with  the 
exercise  of  intelligent  scrutiny  of  these  orders,  as  well,  so  that 
in  case  there  is  an  increased  consumption  due  to  a  poor  grade 
of  supply,  or  to  a  growing  habit  of  wastefulness,  they  can  take 
steps  to  report  or  correct  the  trouble. 

In  any  case  when  a  requisition  comes  through  for  an  unusual 
article,  the  routine  purchasing  department  should  be  charged 


ON 

HOTOR  CO. 

Rp.np.ivin?  Hntinp 

wessj 

.     \ 

1 

WFIG 

HT 

tarn 

Pinners                           mis                                  ennss 

ht                        iirrwni 

Oumtity         |    Weijht    |    Unit    |                                                        Matrial                                                              |       Symbo) 

- 

0 

rder  Record 

Inquiry 

By 

Kiplj 

By 

Contents 

By 

j  Reply     1 

y                                  Contunts 

- 

1 

Blueprints                                            Patterns 

Proofs  am  S 

moles 

Order  Completed 

Submitted 

Received    | 

Received 

131 

Deceived 

Delivered 

Corrected 

O.K. 

Returned 

1 

Returned    | 

0.  K'd 

1 

SHIPMENTS 

■MM 

BUM 

Bal. 

Received 

Billed 

Bal. 

Received 

Billed 

Bal. 

Date 

Q't».|wjt 

fcPC 

Date 

Cty. 

we; 

If 

Due 

Date 

Q'ty. 

Wjt. 

H-.c 
No. 

Date 

Q'ty 

Wjt. 

s 

Due 

Date 

O'ty. 

Rec. 
No. 

Date 

Q'ty. 

Wjt 

No. 

Due 

FORMS  XII  and  XIII:  The  order  record  gives  a  complete  history  of  every  transaction  connected 

with  every  order.    The  receiving  notice,  likewise,  itemizes  all  necessary  information  about  goods 

as  they  are  received  at  the  factory 


with  the  duty  of  ascertaining  all  the  facts  relative  to  the  matter 
and  placing  them  before  the  chief  executive,  with  the  requisition, 
for  his  decision.  In  this  way  the  executive  can  be  relieved  of 
the  routine  of  approving  an  endless  number  of  standard  orders, 


78 PURCHASING   METHODS 

and  yet  feel  that  his  departments  are  not  calling  for  a  quantity 
of  unnecessary  supplies. 

Some  executives,  however,  believe  it  a  valuable  check  to  ap- 
prove personally  every  requisition  to  purchase,  even  though  the 
signing  is  largely  perfunctory.  By  carefully  reviewing  one  of 
the  requisitions  now  and  then,  they  secure  almost  the  same  moral 
effect,  so  they  believe,  as  if  they  checked  every  one.  The  man 
who  first  approves  the  requisition  has  no  means  of  knowing 
which  one  his  superior  will  check  closely. 

Dishonesty  and  lack  of  judgment  in  buying  must  further 
be  provided  against,  even  after  the  requisition  has  been  approved. 
One  plan  to  this  end  is  to  purchase  supplies  and  materials  upon 
specification  wherever  possible.  In  other  instances,  committee 
purchasing  rules;  engineering,  sales  and  operating  departments 
are  represented  on  a  committee  of  which  the  purchasing  agent 
is  the  chairman.  The  different  interests  then  serve  as  a  check 
upon  one  another  in  judgment  as  well  as  honesty.  Committee 
purchasing  is  unnecessarily  formal  for  small-quantity  buying. 
The  purchasing  agent  rarely  goes  into  the  market  on  large  or 
unusual  purchases,  however,  without  authority  from  such  a 
committee  or  from  the  chief  executive. 

The  system  planned  by  a  western  manufacturing  concern  is 
modeled  to  care  for  purchasing  details  very  thoroughly,  and  at 
the  same  time  with  a  minimum  of  clerical  labor.  Quick  disposi- 
tion of  every  matter,  with  means  for  instant  reference  in  case  of 
need,  are  the  points  that  this  system  has  specially  aimed  to 
secure.  The  purchasing  agent  keeps  his  desk  free  in  the  current 
of  detail  that  threatens  to  choke  it  up,  by  dispatching  everything 
quickly  and  methodically.  There  is  one  place  for  every  record, 
one  method  of  doing  every  task. 

Requisitions  from  the  production  departments  give  the  pur- 
chasing agent  his  instructions  as  to  what  material  is  to  be  bought, 
and  each  requisition  starts  the  machinery  of  his  office  working 
to  find  the  one  best  "buy."  These  requisitions  (Form  X)  are 
honored  only  when  signed  by  the  person  in  each  department  who 
has  authority  to  direct  purchases. 

All  detail  and  information  requiring  entry  are  incorporated 
on  one  sheet  on  the  form  shown.    It  performs  the  triple  function 


FORMS  AND  SYSTEMS 


79 


of  a  complete  purchase  requisition,  an  inquiry  and  quotation 
record,  and  an  order  and  price  record. 

When  a  requisition  comes  to  his  office  the  buyer  immediately 
notes  in  the  "estimates  solicited"  column,  the  names  of  con- 
cerns which  he  considers  satisfactory  sources  for  supplying 
the  material  wanted.  He  dictates  a  letter  to  his  stenographer 
to  be  sent  to  each  of  them,  or  simply  hands  the  blank  to  her  with 
the  names  of  the  concerns  selected,  and  she  sends  a  form  letter 
to  each  concern  requesting  a  quotation  and  statement  of  possible 
delivery  dates. 

Copies  of  these  letters  are  immediately  sent  to  the  general 


MKTnaoraca                                               INVOICE    REGISTER 

««.      Data                    Cradltw                                  JHHrtsj                 tawnt         Ttrms          ^j        HtztriH    Pmtd 

K*UW 

1 

—  .N. 

J^I 

1  -«..,.>.L..  2  . 

(tn«n»r>nQ    3    ^f»n»ift'»i> 

.....4. 

■:• 

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M                                     Mart*                                                                WftR. 

Hot 

**.                  1 

—      Ma. 

*  at  part                                                                                                                                    Ctesiflcatton 

Sat* 

Orftr                     Una                    Qaw    Rt. 

I   Tradt  Cash          ...           Itart       C 
*   Disc     Oisc.          '•"           Cost      to 

Firjlrt 

»-     Uts          Dellwjry.and*aa» 
1    carload 

1 

-- 

BU0TAT10KS 

B 

it               Tlr*                         M**b 

Prtct                          Tama 

;          -«, 

>__.    ,_      Trad*      Cash         .. 
amm    ■*       Otec      Disc         ra 

.       1   Car-      Lats        S 

*■      jj  IwJ     ctrhld      <* 

—  - 

—  - 

—  - 

z~_ 

J. — , ■==^c=c=z=z 

^— r— p --r-ras: 

!=  — 

• 

FORMS  XIV-XVI:       The  invoice   register  is  kept    in    the    buying  department,  and  shows  the 

amount  and  paying  date  for  every  bill  received.      The  middle  card,  with  its  quantity  scale,  gives 

practically  a  perpetual  inventory  on  each  class  of  material,  and  the  "quotations"  card,  kept  for 

each  article,  shows  where  the  purchase  may  best  be  made 


files,  since  the  requisition  contains  all  necessary  information. 
The  requisition  itself  is  filed  in  the  buyer's  desk,  numerically, 
pending  answers  to  the  letters.  Each  letter  mentions  the  requisi- 
tion number  and  directs  that  replies  make  reference  to  it.  As 
the  replies  arrive,  therefore,  it  is  a  simple  matter  to  find  the 
proper  requisition  and  note  on  it  the  quotations  and  delivery 
dates  promised.  When,  in  due  time,  all  propositions  are  received 
and  noted,  the  buyer  or  committee  selects  the  one  which,  every- 


80 PURCHASING   METHODS 

thing  considered,  is  most  favorable.  Under  the  "orders  placed" 
heading,  the  name  of  this  firm  is  entered  together  with  the  quan- 
tity to  be  purchased  and  the  price.  The  buyer  hands  the  blank 
again  to  his  stenographer,  who  sends  the  purchase  order  accord- 
ingly. 

All  purchase  orders  bear  the  requisition  number,  so  that  there 
is  a  ready  cross-reference  between  requisitions  and  orders.  The 
requisition  is  permanently  filed  under  its  serial  number. 

The  original  copy  of  the  purchase  order,  as  sent  to  the  sup- 
plier, is  shown  as  Form  XL  The  arrangement  of  this  copy  is 
convenient,  because  it  groups  matters  which  are  similar  in 
character.  It  is  particularly  desirable  to  keep  all  "price  and 
terms"  data  separate  from  the  rest  of  the  composition.  By 
having  it  in  the  position  shown,  such  information,  which  it  is 
held  desirable  to  withhold  from  various  individuals  outside 
of  the  purchasing  department,  is  excluded  from  copies  issued 
to  other  departments  by  the  simple  expedient  of  having  such 
copies  shortened  so  as  not  to  receive  the  carbon  impression.  One 
copy  of  this  purchase  order  is  immediately  and  permanently 
filed  under  its  serial  number.  Another  copy  is  filed  under  the 
name  of  the  supply  house. 

On  the  reverse  side  of  the  copy  of  the  purchase  order  (Form 
XII),  columns  are  so  arranged  that  all  facts  concerning  the  order 
may  be  chronicled  compactly.  If  the  information  is  carefully 
recorded,  the  form  is  a  desk  cleaner  and  a  positive  check  on  all 
activities  in  connection  with  each  purchase. 

One  of  the  valuable  features  of  this  form  is  the  record  of  ship- 
ments. Details  regarding  shipments  are  posted  as  soon  as  the 
goods  appear,  so  that  the  record  is  kept  constantly  up  to  date. 
Invoices  also  are  recorded  as  soon  as  they  are  received,  and  are 
then  checked  with  receipts  of  goods.  When  the  material  arrives 
before  the  invoice,  record  is  made  to  check  with  the  latter.  The 
card  thus  affords  ready  information  about  the  condition  of  ship- 
ments, total  received  to  date,  amount  on  the  way,  and  particularly 
it  permits  quick  attention  to  discrepancies  which  come  up  in 
checking  invoices  with  receipts. 

Invoices  recorded  but  hot  checked  with  receipts  are  care- 
fully placed  in  alphabetical  order  in  the  buyer's  file,  pending 
the  receipt  of  the  material  itself.    When  such  deliveries  are  finally 


FORMS  AND   SYSTEMS 81 

made,  the  correct  invoice  is  speedily  found  by  referring  to 
invoices  posted  on  the  purchase  order.  There  the  register  num- 
ber of  the  invoice  identifying  the  receipt  is  given. 

In  some  cases  material  is  purchased  from  one  source  and 
directed  to  be  shipped  to  another,  to  the  purchaser's  account. 
These  shipments  are  recorded  in  the  same  manner  as  those  made 
to  the  purchaser  direct.  The  invoices  are  received  in  the  same 
manner,  but  in  order  to  keep  informed  of  receipts  of  material  at 
the  branch  houses  a  special  report  form  is  provided,  made  out  in 
triplicate  and  serially  numbered.  The  first  and  second  copies 
are  sent  to  the  consignee,  and  the  third  copy  is  retained  by  the 
buyer. 

A  glance  at  the  form  shows  that  the  purchaser  has  received 
notice,  by  invoice,  from  the  supply  house,  and  it  reports  in  full 
the  contents  of  the  invoice.  The  consignee  immediately  upon 
receipt  of  the  shipment  reported,  notes  his  actual  receipts  on  the 
duplicate  copy  sent  him,  and  returns  this  duplicate  to  the  pur- 
chaser. The  purchasing  department  then  destroys  the  triplicate 
copy  and  records  the  report  on  the  purchase  order,  thus  keeping 
a  close  tab  on  indirect  shipments. 

Completely  filled  out  for  the  individual  purchase,  Form  XII  is 
filed  away  carefully.  Frequent  reference  is  made  to  these 
records  when  occasion  again  arises  to  purchase  the  same  material. 

HOW  TO  CHECK  INVOICES  AND  RECEIPTS 
IN  THE  PURCHASING  DEPARTMENT 

/CHECKING  of  invoices  and  receipts  in  many  concerns  is  per- 
formed in  the  accounting  department.  This  is  often  unwise, 
because  the  purchasing  department,  having  made  the  purchase 
and  carried  on  all  correspondence  in  connection  with  it,  is  in  the 
best  position  to  identify  receipts  of  material  with  invoices.  Fur- 
thermore, the  purchasing  department  needs  some  record,  and 
by  doing  the  work  itself  prevents  a  duplication  of  tasks.  "When 
the  invoice,  therefore,  leaves  the  purchasing  department,  it  is 
entirely  checked  for  price,  terms,  material  and  quantity,  and  is 
approved  for  payment.  Nothing  remains  for  the  accounting  de- 
partment but  to  audit  and  pay  the  bill.  This  puts  all  work 
where  it  belongs. 
"When  goods  are  actually  being  received,  it  is  essential  that  the 


82  PURCHASING   METHODS 


No  Charges  Allowed  for 
Packing  or  Cartage 

American 

Put  Order  Number 
¥C3 

Electric  Specialty  Company 

99— 101  West  Grant  Street 
Chicago 

On  All  Bills  and  Package* 

Clarence  A.  Anderson, 

Cat* 

Sept.  rtb/1913 

Buffalo,  H.  T. 

4000        0256  Lamp  Sockets  on  the  following  Schedules 
1000  Nov.  1st 
1000  Dec.  1st 
1000  Jan.  1st,  ,  191* 
1000  Feb.  1st,   19.14, 

Specialty  Company 

FORMS  XVII  and  XVIII:  Many  manufacturers  with  small  shops  cannot  afford  the  expense  of  a 
stock  clerk.  Compact  purchasing  records  widely  applicable  in  such  establishments  are  here  shown. 
By  these  two  forms  the  purchasing  agent  is  able  to  order  material  and  record  the  complete  performance 

receiving  report  give  all  information  in  connection  with  the  ship- 
ment, including  the  purchase  order  number.  This  is  done  con- 
veniently by  Form  XIII.  If  there  is  no  purchase  order  covering 
the  receipt  of  any  shipment  it  is  simply  not  received  at  all.  By 
following  this  rule,  the  company  has  compelled  its  suppliers 
to  indicate  on  a  packing  slip,  or  on  the  outside  of  the  container, 
the  purchase  order  number  upon  which  the  shipment  is  made. 

Invoices,  for  the  reasons  explained  above,  come  direct  to  the 
purchasing  departments  from  the  mail-opening  room.  Form  XIV 
illustrates  the  type  of  invoice  register  in  use.  Each  invoice, 
as  soon  as  it  is  received,  is  recorded  and  given  a  register  number. 
By  this  means  it  is  possible  to  keep  track  of  the  invoice  so  as  to 
lose  no  discounts.  Further,  by  recording  the  amounts  of  the 
invoices,  the  purchasing  department  knows  at  all  times  just  how 
much  money  its  purchases  amount  to  for  the  week,  month,  or  year. 

The  record  card  used  to  keep  track  of  this  kind  of  material  is 
shown  as  Form  XV.  Since  much  of  the  business  of  this  concern 
consists  of  goods  manufactured  and  sold  from  stock,  large  quanti- 
ties of  the  same  kinds  of  material  have  to  be  bought  over  and  over 
to  keep  the  supply  up  to  date.  The  card  is  self-explanatory, 
except  for  the  series  of  figures  at  the  top.  This  arrangement  is 
designed  for  use  with  sliding  metal  clips.    Fastened  over  any  of 


FORMS  AND   SYSTEMS 


83 


Item  or 
Lot  No. 

Received 

Invoice 

Remarks 

Order  Number 

*C3 

Quantity 

Date 

Quantity 

Date 

"7 

/too 

"/z-r 

1000 

"/' 

1000 

"/2  7 

iooo 

uh 

1  000 

1 2-/27 

%00 

/?* 

2.C0    ?n>    CA<trw«t 

1000 

1  /Zl 

IOOO 

2/t 

/ooy^-^d  <«*<**  JutetGiH 

HO  0 

S&&-    cUrcr^e. 

Quality    O.K. 

*-* 

4-000 

4.000 

Quantity  0.  K. 

w 

Clarence  A.  Anderson, 

Buffalo,  N.  T. 

4000        #256  Lamp  Sockets  on  the  following  Scheiulat 
1000  Nov.  1st 
1000  Dec .  1st 
1000  Jan.  1st,    1914 
1000  Feb.  1st,    1914 

of  the  shipper,  although  no  stock  clerk  is  employed.     The  carbon  copy  above  provides  space  for  noting 

in  all  essential  detail  the  receipt  of  material  and  invoices,  and  the  results  of  inspection,  both  as  to 

quality  and  quantity.    Spaces  for  check  marks  help  to  insure  their  use 


the  figures,  a  clip  indicates  that  enough  material  has  been  pur- 
chased to  produce  that  many  units  of  the  article  in  multiples  of 
10,  100  or  1,000. 

Frequently,  certain  goods  are  wanted  in  a  hurry  and  there  is 
no  time  to  write  for  quotations.  On  all  such  goods  a  record  of 
quotations  (Form  XVI)  is  maintained.  With  this  card  carefully 
kept  up  to  date,  one  for  every  kind  of  material,  it  is  possible  to 
buy  satisfactorily  with  little  delay. 

A  catalog  file  with  an  adequate  index  is  also  kept.  To  avoid 
the  difficulty  of  reference  frequently  experienced  with  a  large 
catalog  file,  the  index  is  made  extremely  thorough.  A  five-by- 
three-inch  card  is  used,  and  every  catalog  is  indexed  twice :  first 
by  name  of  the  article  or  articles  sold,  and  next  by  name  of  the 
maker.  It  is  thus  possible  to  locate  quickly  for  any  article  all 
the  manufacturers  whose  catalogs  are  on  hand;  or  to  find  from 
the  file  what  kind  of  material  any  manufacturer  can  supply. 

A  different  method  for  recording  purchases  is  used  by  the 
purchasing  agent  of  a  company  doing  a  business  scarcely  large 
enough  to  warrant  the  employment  of  a  stock  clerk.  The  scheme 
involves  the  making  of  a  carbon  copy  of  the  purchase  order  as 
illustrated  in  Forms  XVII  and  XVIII. 

Many  orders  are  received  complete  in  one  shipment,  but  where 


84 


PURCHASING   METHODS 


they  are  not,  ample  space  is  provided  for  the  notation  of  each 
shipment.  Should  the  order  call  for  more  than  one  number 
from  the  company  it  is  addressed  to,  a  separate  copy  of  this 
form  is  used  for  each  item.    A  column  for  remarks  is  provided 


Purchase  Order  No.        9576  A 


This  order  is  tin  only  form  of  contract  for  purchases  recognized  bv  this  firm. 
Our  order  number  must  appear  on  each  Invoice  and  package. 
Address  all  invoices  and  correspondence  to, 

The  Clothcraft  Shop 

of 

The  Joseph  and  Feiss  Co. 


Explanations 


I  I         1 


FORMS  XIX-XXI:  Purchase  orders  used  by  the  Joseph  and  Feiss  Company  are  alike  except  on 
the  lower  part,  where,  on  the  duplicate  and  triplicate,  the  purchase  is  analyzed.  _  The  former  is  the 
numerical  follow-up,  and  also  vouchers  the  invoice.  The  latter  is  the  alphabetical  follow-up,  and 
•iter  the  invoice  has  been  checked  for  payment  is  filed  permanently  in  the  purchasing  department 


so  that  notations  may  be  placed  opposite  the  particular  items 
involved  in  any  of  the  adjoining  columns. 

A  record  of  this  kind  is  of  great  importance  to  the  purchasing 


FORMS  AND  SYSTEMS  S5 

agent  of  any  company  because  in  it  is  given  the  complete  per- 
formance of  the  shipper  of  the  goods  ordered.  It  prevents  the 
passing  of  duplicate  invoices  from  the  shipper.  Furthermore  it 
reminds  the  purchasing  agent  of  the  necessity  of  writing  to  ascer- 
tain the  reason  for  delays  that  show  up.  Thus  it  anticipates 
further  delay  in  time  to  prevent  serious  shortages  and  allow 
telegraphic  requests  to  hurry  needed  shipments.  Finally  it  may 
be  preserved  as  a  record  and  consulted  at  some  future  date  to 
determine  the  length  of  time  required  to  get  the  goods  from 
regular  sources. 

Uniformity  in  the  size  of  purchase  forms  has  many  advantages. 
In  some  purchasing  departments  the  purchase  order  is  one  size, 
the  quotation  price  record  another,  the  requisition  to  purchase 
still  different.  This  means  a  variety  of  filing  drawers.  Also, 
when  purchase  order,  requisition  and  receipt — which  must  be 
matched  with  the  invoice  and  together  sent  to  the  accounting 
department  for  payment  of  the  account — vary  in  shape  and  size, 
inconvenience  is  occasioned  all  along  the  line.  The  purchasing 
forms  in  use  in  the  Clothcraft  Shop  of  Joseph  &  Feiss  have  a  spe- 
cial significance  in  this  connection.  The  5x8  size  is  adhered  to 
rigorously.  The  purchasing  order  is  in  triplicate,  the  original 
(Form  XIX)  being  on  gray  crash  linen  to  conform  with  the  regu- 
lar letterhead.  The  duplicate  (Form  XX)  is  on  straw-colored 
bond  and  differs  from  the  original  only  below  the  ordering 
information,  where,  on  the  first  copy  the  firm  name,  address 
and  crest  and  the  instructions  standard  to  all  purchases  appear, 
the  duplicate  allows  several  lines  for  any  detailed  explanation,  a 
block  of  columns  for  the  distribution  of  the  purchase  according 
to  accounts  and  classes  of  material,  and  spaces  for  the  approvals 
of  the  purchasing  superintendent  and  the  auditor.  This  second 
copy  is  known  as  the  ' '  Purchase  Voucher. ' ' 

The  triplicate  (Form  XXI)  is  a  buff  card  and  is  called  the 
"Purchase  Record."  It,  too,  differs  from  the  original  on  the 
lower  part.  It  is  identical  with  the  duplicate  except  that  where 
space  for  explanation  appears  on  the  latter,  here  columns  are 
provided  for  the  detailed  analysis  of  the  purchase — date  of  pur- 
chase, amount,  invoice  numbers,  dates  vouchered  and  dates  and 
quantities  received.  Of  course,  if  the  purchase  is  entirely  ful- 
filled in  one  shipment,  there  will  be  only  one  line  of  entries. 


PURCHASING   METHODS 


Space  for  the  initials  of  the  auditor — "Checked  for  Payment" — 
also  appear  on  the  record  card,  and  at  the  lower  right-hand  cor- 
ner of  all  copies,  a  place  for  the  signature  of  the  official  who 
authorizes  all  purchases. 

The  duplicate  and  triplicate  copies  of  the  purchase  order  go 
to  the  auditor,  clipped  together  with  the  voucher  of  the  seller, 
after  they  have  been  compared  and  approved  for  payment  by 
the  purchasing  superintendent.  The  auditor  retains  all  but  the 
triplicate,  which,  after  signing  his  initials,  he  returns  to  the 
purchasing  department.  Here  it  is  placed  on  file  and  when 
cross-referenced,  constitutes  a  valuable  part  of  the  working 
information  for  future  negotiations.  All  purchase  orders 
originate  with  an  E.  M.  &  S.  (Equipment,  Materials  and  Sup- 
plies) department.  Requisition  from  the  department  for  which 
the  goods  are  needed,  after  the  E.  M.  &  S.  Department  has 
passed  the  requisition  as  not  covered  by  stock  on  hand.  This 
form,  also,  is  5x8,  and  is  printed  on  a  canary  bond.  This  system 
contains  elements  that  are  worthy  the  careful  study  of  any 
purchasing  department. 


Part  II 

SETTING  UP  MATERIAL 
STANDARDS 


AUTHORITIES  AND  SOURCES 
FOR  PART  II 


Chapter  IX.  Contributed  by  Mr.  Feiker,  with  J.  V.  Hunter, 
mechanical  engineer,  Mr.  Murphy  and  Mr.  Porter  collaborating. 
Among  the  factories  from  which  the  instances  are  taken  are 
the  Garf ord  Automobile  Company,  a  brass  foundry,  and  a  manu- 
factory of  toilet  articles. 

Chapter  X.  Contributed  by  Mr.  Feiker  and  Mr.  Rockwell 
in  collaboration  with  H.  S.  Hosford,  engineer  of  methods,  West- 
ern Electric  Company;  Philip  E.  Kuntz,  purchasing  agent,  Felt 
&  Tarrant  Manufacturing  Company;  Henry  D.  Martin,  formerly 
general  superintendent,  I.  E.  Palmer  Company;  Mr.  Murphy, 
and  Mr.  Porter.  The  investigation  extended  into  more  than  a 
score  of  different  lines.  Particular  mention  is  made  of  the  ex- 
perience of  wood-working  plants,  a  vehicle  factory,  an  auto- 
mobile company,  a  hammock  manufactory,  an  office-appliance 
concern,  and  three  electrical  manufacturers. 

Chapter  XI.  H.  Cole  Estep,  Penton  Publishing  Company; 
and  Mr.  Porter,  in  collaboration  with  Mr.  Murphy,  contributed 
this  chapter.  Among  the  lines  mentioned  are  leather,  metal, 
telephones,  petroleum,  paint,  and  electrical  specialties. 

Chapter  XII.  Contributed  by  Frederic  Dannerth,  consult- 
ing chemist,  and  Mr.  Porter.  This  chapter  includes  material 
supplied  by  H.  A.  Russell,  of  the  purchasing  department,  A.  B. 
Farquhar  Company,  and  also  the  rules  for  drawing  speci- 
fications laid  down  by  Dr.  Charles  Benjamin  Dudley  while 
president  of  the  International  Association  for  Testing  Material, 
and  the  American  Society  for  Testing  Materials. 


IX 

ELIMINATING  GUESSWORK 
IN  BUYING 


COMPLAINTS  from  dealers  about  the  quality  of  the  product 
several  years  ago  poured  in  upon  one  of  America's  best 
known  firms  manufacturing  toilet  articles.  Its  various 
brands  of  perfume  had  in  one  season  lost  their  lasting  qualities. 
Some  were  without  fragrance  after  only  a  week  or  two.  The 
concern's  reputation  and  good  will  were  in  peril. 

The  head  of  the  department  was  nonplussed.  He  made  per- 
fumes as  his  father  and  grandfather  had  made  them  before  him. 
He  could  detect  no  deterioration  in  his  methods. 

So  the  president  had  to  seek  advice  outside  the  plant.  Breaking 
the  rule  of  years  as  to  secrecy  of  manufacture,  he  called  together 
his  heads  of  departments,  introduced  the  assistant  in  chemistry 
he  had  obtained  from  a  neighboring  college,  and  gave  him  the 
privilege  of  investigating  without  restriction. 

Then  ensued  an  interesting  trial  between  the  rule  of  thumb  and 
chemistry.  After  three  days  of  friendly  visiting  with  the  head 
of  the  perfume  department,  the  young  assistant,  now  a  well- 
known  consulting  chemical  engineer,  was  finally  allowed  to  enter 
the  laboratory  on  pledge  of  absolute  secrecy.  And  the  whole 
trouble  was  located  in  that  first  walk  through  the  department. 
The  raw  material,  alcohol,  was  not  up  to  grade.  It  contained 
fusel  oil,  which  was  responsible  for  the  failure  of  the  product. 

In  the  readjustment  which  followed,  the  president  proved  that 
he  had  learned  a  lesson  regarding  guesswork  in  purchasing.  He 
established  a  laboratory  and  set  chemists  to  work  standardizing 
materials  and  processes.  When  later  the  department  head  died, 
and  the  traditional  methods  seemed  about  to  be  lost,  the  formulas 


90 SETTING   STANDARDS 

and  specifications  were  there  to  take  their  place.  And  from  that 
time  production  in  this  plant  has  rested  on  not  guesswork,  but 
on  laboratory  methods.  Material  requirements  are  ascertained 
and  standardized.  These  standards  become  specifications  and  are 
included  in  the  contract.  And  by  these  standards,  the  purchas- 
ing agent  sees  to  it  that  the  supplier  lives  up  to  his  bargain. 

Rules  of  thumb  served  well  enough  when  production  was 
measured  on  a  one-man  scale,  buying  in  household  quantities.  In 
those  days  the  proprietor,  doing  his  own  buying,  inspection  and 
handiwork,  could  regard  his  first  order  merely  as  an  experiment, 
and  by  skilled  personal  inspection  could  soon  make  certain  that 
what  he  bought  was  what  he  needed.  But  in  present-day  pro- 
duction for  national  markets,  with  narrow  border  lines  of  profit 
and  with  world-wide  sources  of  supply  to  draw  upon,  purchases 
by  tons,  representing  fortunes  in  invested  finances,  must  not  be 
founded  on  guesswork.  And  fortunately,  scientific  knowledge  of 
materials  has  kept  pace  with  this  need.  The  purchasing  agent 
no  longer  needs  to  guess;  he  can  make  almost  every  important 
purchase  conform  to  specifications  and  pass  the  searching  micro- 
scopic eye  for  quality  (Forms  XXII  and  XXIII). 

Buying  is,  in  fact,  fundamentally  a  campaign  against  guess- 
work. The  factory  is  rarely  positive  as  to  either  the  sort,  quan- 
tity or  quality  exactly  suited  to  its  needs.  Under  conditions  of 
modern  transportation,  possible  sources  of  supply  may  number 
thousands,  affording  a  bewildering  gradation  of  advantages  for 
the  purchasing  agent  to  select  from.  Similarly,  the  trend  of 
general  supply  and  demand  as  affecting  prices  and  deliveries, 
presents  a  factor  so  complex  that  guesswork  can  only  be  mini- 
mized. And  even  after  the  purchasing  agent  has  determined 
these  matters,  nothing  short  of  the  most  exact  specifications  can 
express  his  wishes  in  so  precise  a  way  that  the  supplier  cannot 
misunderstand  them.  Moreover,  the  latter  may  still  blunder, 
may  be  misunderstood  by  his  supplier,  may  allow  too  wide  a 
variation  in  his  standards  of  workmanship,  may  be  tempted  to 
substitute  or  slight  or  adulterate.  Only  exact  specifications  and 
tests  will  then  enable  the  purchaser  to  "nail"  the  error  and 
force  an  adjustment.  And  with  guesswork  on  any  of  these  points, 
the  purchasing  agent  is  more  or  less  uncertain  regarding  the 


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vap,  IS  7  ill 

;    : 

1 

T: 

t*?--         *: 

—  — . 

f^:  * 

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m 

Tomorrow's  purchasing  depends  upon  today's  records.  Two  handy  pieces  of  special  equipment  for 
buyers  are  here  shown.  Above  is  a  sorting  desk  at  the  Baker-Vawter  Company  in  which  requisitions 
or  orders  are  quickly  sorted  for  totaling  on  an  adding  machine  for  accounting  purposes.  >  Below  is  a 
wheeled  filing  tray  on  which  the  stock  records  stand,  for  ready  reference  and  easy  storage  in  the  vault 


The  modern  factory  has  not  only  gone  to  the  outside  laboratory  for  help  in  selecting  materials,  but  has 

also  found  it  worth  while  to  install  specialized  laboratories  anil  to  devise  ingenious  testing  equipment 

vi  various  types.   In  this  laboratory  oil  is  undergoing  tests  for  density,  flash-point,  viscosity,  and 

lubrication  value 


GUESSWORK   IN   BUYING 93 

price  he  should  pay — open  to  the  blunder  of  too  low  first  cost, 
or  of  paying  high  prices  for  reputation  only. 

Equipped,  on  the  other  hand,  with  full  knowledge — of  sources 
of  supply  and  market  conditions,  of  the  demand  made  upon  him 
by  his  factory,  of  the  elements  and  processes  involved  in  supply- 
ing what  he  requires  and  their  cost — the  purchasing  agent  is  in 


TENSILE  TEST 

O.     5TX.Q    -      J  "  M CARD  NO.-H- 


P.  O.  NO.      IVIQO  pAts      rVpVr.Vll] TEST  NO._k>_ 

DATE  RECEIVED §   "  2>\      J  4 


SE353 


CONDITION  OF  MATERIAL, 


ss 


MANUFACTURED  BY LESQEBlSS    SSjj  C  fV 


-LENGTH  BETWEEN  MARKS- 


JLl 


THICKNESS DIAMETER. 


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ORIQ.  AREA *\S  .hJ^-VftV STRESS  AT  RUPTURE  ft  IsflftflilvV   fcfcj 


CONt.  AREA         .  \*]\t>\  Nt^.VNV STRESS  AT  EL.  LIMItSVLDQ___ 

%  CONTRACTION H^'MH  *  ELONGATION  "VJlV''  »3LEl% 


CHARACTER  OF  FRACTURE. 


THE  GARFORD  COMPANY 


FORM  XXII:   On  this  form  the  chemist  of  the  Garford  Automobile  Company  keeps  a  record  of  the 

physical  tests  of  bar  steel  and  similar  materials.  From  every  shipment  a  test  piece  is  taken.    This  h 

placed  in  a  testing  machine  and  the  tensile  strength  recorded.     A  chemical  analysis  is  also  made  from 

chips  of  the  same  steel 

a  position  of  natural  advantage.  He  then  knows  what  to  get,  how 
to  get  it,  what  he  should  pay  for  it,  whether  to  buy  a  stock  item 
or  have  a  composition  made  to  his  order,  and  finally,  whether  he 
is  getting  what  he  purchased. 

BUYING  BY  DEFINITE  QUALITY  KNOWLEDGE  BASED 
ON  DEFINITE  METHODS 

PURCHASING  has  not  yet  grown  up  to  the  problems  brought 
upon  it  by  the  sudden  and  enormous  expansion  of  modern 
supply  and  demand.  Advertising  has  done  something  to  bring 
the  groping  buyers  and  sellers  together,  but  many  purchasing 
agents  have  not  yet  learned  how  to  comb  the  markets  for  what 
they  want.     Recently  the  purchasing  department  of  a  large 


94 SETTING   STANDARDS 

corporation  was  unable  to  meet  the  specification  to  finish  the 
telephone  instruments  in  a  hotel  in  a  mahogany  enamel  to  match 
the  furniture.  After  the  plan  of  decoration  had  been  changed, 
however,  a  small  manufacturer  located  in  the  same  city  turned 
up  with  exactly  the  finish  needed.  Buying  right  has  come  to 
mean  buying  with  definite  knowledge,  worked  out  by  definite 
methods.  This  case  is  an  illustration  that  such  knowledge  and 
methods  are  needed  even  in  the  location  of  supply  sources. 

It  is  in  questions  of  kind,  quantity  and  quality,  however,  that 
the  methods  of  precision  have  made  the  most  headway  against 
guesswork  in  buying.  The  origin  of  specifications  usually  lies 
in  the  fact  that  some  difficulty  has  arisen  in  a  process;  some 
machine  ceases  to  give  satisfactory  service ;  some  structure  fails ; 
some  material  in  use  does  not  give  good  results.  This  difficulty 
results  in  an  attempt  to  locate  the  cause.  In  other  cases  a  largely 
used  product,  furnished  by  different  makers,  is  found  to  vary  in 
quality.  Sometimes  it  is  desired  to  standardize  certain  prac- 
tices, and  make  them  uniform  in  all  the  mills  of  the  corporation, 
and  to  do  so  requires  that  the  same  quality  of  material  be 
furnished  and  used  in  all  cases.  This  development  leads  finally 
to  the  issuance  of  specifications. 

A  fourfold  advantage  usually  follows.  The  testing  of  samples 
and  the  working  out  of  specifications,  either  in  the  factory  or 
with  technical  aid,  in  the  first  place,  lead  the  purchasing  agent 
and  the  production  men  to  determine  their  needs  exactly.  Often 
the  factory  heads  have  had  only  a  vague  idea  of  what  they  want. 
To  get  a  sharply  focused  idea  of  the  need  eliminates  guesswork 
and  is  the  first  rule  of  sound  purchasing.  In  the  purchase  of 
several  carloads  of  catalog  paper,  this  advantage  was  recently 
called  to  the  attention  of  a  factory  executive  in  an  unusual  way. 

Instructions  to  the  advertising  man  had  been  to  make  proper 
selection  of  paper  and  in  cooperation  with  the  purchasing  agent 
to  obtain  bids  from  different  paper  houses  by  circular  letter. 
In  so  doing  he  sent  the  form  letter  also  to  an  industrial  chemist, 
who,  he  had  heard,  was  a  paper  expert.  The  very  first  reply 
was  from  the  chemist.  And  instead  of  merely  asking  that  he 
be  consulted  in  the  placing  of  the  contract,  he  had  criticised  the 
purchaser's  crude  description  of  what  he  wanted. 

The   publicity  head   had   considered   appearance,   strength, 


GUESSWORK  IN  BUYING 


05 


weight,  price  and  the  fact  that  halftones,  line  drawings  and 
type  would  in  many  cases  appear  on  the  same  page.  To  the 
specification  of  weight  the  chemist  added  bulk;  to  appearance, 
color ;  to  strength,  durability  and  the  service  treatment  demanded 
for  the  maximum  number  of  halftone  screen  lines  to  the  square 
inch.  Finally,  he  suggested  that  the  quantity  contemplated 
would  warrant  a  "mill  run"  and  thus  afford  a  paper  especially 
adapted  to  the  purpose  in  view. 

In  the  second  place,  exact  knowledge  of  what  is  needed  enables 
the  supplier  to  get  a  clearly  defined  idea  of  what  he  is  expected 


TEST  RESULTS  OF  MATERIALS  OR  SUPPLES 


m 


d.  A  fall o.  (L^^umAoii: 


a  Lmu  L,  CLJta  Oil  (Lf*«y 


■tU- 


±. 


Our  Present  Standard      Qjjtbuj    -     6.   T.cr  <Q  Cr Mo    ft  jj.   $Jjj. 


Method  of  Conducting  Test 


Qj^tjjLU^ 


QJy  JsTst/  s*tt    JhiMjLr    nv£  AOLMtSXl  <**$  1%  J^Us 


SWt<>    It-tfV^    M/ .tttrtM/ .<«**■   «n*Y  ,k*JUK*/-    JtMA 


t 


Tested  by 


TL 


FORM  XXIII:    When  verbal  reports  on  materia)  tests  were  found  insufficient  in  one  factory  and 

'  form  was  planned.    _  The  i 

paint  tried  out  for  priming 


led  to  disputes  later  on,  this  report  form  was  planned.      The  record  covers  a  test  made  of  a  new 
■  '  ied o  •  * 


to  furnish.  Scientific  standards  allow  neither  that  the  buyer 
guess  what  the  shop  wants,  nor  that  the  seller  guess  what  the 
buyer  wants.  Chemical  research  among  metals,  for  instance,  has 
resulted  in  specifications  that  define  steel  and  alloy  requirements 
more  clearly  than  the  average  purchasing  agent  could  possibly 
do  in  any  other  way. 

Such  specifications,  to  mention  the  third  advantage,  not  only 
focus  the  factory's  requirements  and  furnish  a  standard  to 
which  the  supplier  can  work ;  they  also  equip  the  inspectors  with 


SETTING   STANDARDS 


tests  and  measures  by  which  they  judge  deliveries,  in  search 
of  adulteration,  substitution  and  other  errors.  This,  again,  is 
a  fundamental  rule  of  sound  buying.  "With  many  commodities, 
adulteration  or  substitution  is  difficult  of  detection,  and  there- 
fore so  tempting  that  specifications  have  been  the  buyer 's  natural 
recourse.  Lard  oil  for  screw-cutting  machines,  for  instance, 
can  be  obtained  in  what  is  termed  a  "mineralized"  state  or 
with  a  certain  per  cent  of  mineral  oil  added  to  cheapen  the 
cost.  When  pure  lard  oil  has  been  ordered,  do  you  guess  or  do 
you  know  that  you  are  not  receiving  the  cheaper  "mineralized'5 
product?  Of  the  cases  investigated  by  one  purchasing  agent, 
nearly  fifty  per  cent  have  shown  adulteration  with  either  mineral 
or  cottonseed  oil.  The  latter  adulteration  is  a  particularly  hard 
one  to  detect. 

Turpentine,  too,  is  often  adulterated  with  a  percentage  of 
mineral  oil,  usually  a  heavy  naphtha,  which  will  lengthen  the 
drying  period.  Casual  inspection  will  rarely  protect  the  buyer 
against  such  conditions. 

SPECIFYING  THE  CHEAPER  PRODUCT 
AND  PAYING  ONLY  FOR  IT 

A  NOTHER  case  of  adulteration  indicates  the  necessity  of 
something  more  than  guesswork  in  the  purchase  of  special 
alloys.  An  Ohio  Valley  firm  was  furnishing  some  five  per  cent 
phosphor-tin  alloy  to  a  brass  foundry.  This  alloy  was  used  in 
various  valve  castings  of  great  weight.  When  several  successive 
castings  had  been  lost,  samples  of  all  the  raw  constituents  of 
the  alloy  were  rushed  to  a  chemist,  who  found  in  the  phosphor-tin 
seventeen  and  nine-tenths  per  cent  lead.  Pure  phosphor-tin 
was  then  worth  forty-eight  cents  a  pound,  while  lead  was  worth 
four  and  one-half  cents.  Yet  the  supplier  explained  that  he 
"considered  that  the  addition  of  the  lead  would  in  no  wise 
injure  the  metal  when  used  in  bearings."  Specifications  based 
upon  and  checked  against  tests  now  relieve  this  concern  of  the 
danger  of  buying  lead  at  phosphor-tin  prices. 

If  for  the  service  rendered,  an  adulteration  does  no  harm,  to 
eliminate  guesswork  enables  the  purchasing  agent  to  specify 
the  cheaper  product  and  pay  only  for  it.    And  if  the  adultera- 


GUESSWORK  IN  BUYING 97 

tion  is  hurtful,  it  is  better  forbidden  in  the  contract  and  de- 
tected by  receiving  room  tests  than  left  to  guesswork  and 
discovered  running  through  the  finished  product.  When  it  comes 
to  adulterating  what  is  purchased,  the  average  manufacturer 
will  prefer  that  his  own  experts,  rather  than  those  of  his  suppliers, 
plan  the  adulteration  and  award  the  saving. 

Finally,  specifications  and  knowledge  of  basic  elements  furnish 
the  purchasing  agent  with  a  key  to  prices.  They  put  him  at  an 
advantage  in  considering  bids,  in  bargaining,  in  arranging 
adjustments.  By  means  of  them,  mixing  to  formula  on  a  cost- 
plus  basis  has  become  a  business,  and  by  resort  to  this  plan  many 
purchasing  agents  obtain  exactly  what  they  want  at  the  lowest 
price  consistent  with  value.  In  the  purchase  of  bronze  alloys, 
for  example,  a  manufacturer  by  this  method  consistently  saves 
several  cents  a  pound. 

In  many  plants,  it  is  the  work  of  one  engineer  or  department 
to  find  what  each  item  purchased  "ought  to  cost,"  by  study  of 
materials,  processes  and  correct  cost-keeping.  "Whenever  time 
permits,  such  analysis  is- the  purchasing  agent's  one  masterful 
approach  to  his  problem.  It  is  only  when  an  emergency  or  a 
blunder  forces  the  buyer  into  the  market  without  cost  data  that 
he  is  open  to  the  perils  of  secret  price  manipulation. 

SPECIFICATIONS  PUT  RESPONSIBILITY  ON  THE  LABORATORY  AND  LEAVE 
THE  BUYER  FREE  TO  STUDY  MARKETS 

DUT  specifications  by  no  means  reduce  purchasing  to  a  clerk's 
job.  The  policy  of  buying  by  specification  throws  more 
rather  than  less  responsibility  upon  the  purchaser,  for  it  assumes 
that  those  who  set  and  maintain  the  standards  know.  The 
burden  of  judgment  as  to  kind  and  quality  is  merely  shifted 
from  buyer  and  seller  to  the  laboratory  specialists,  and  the 
purchasing  agent  who  is  sure  of  his  backing  is  thus  left  free  to 
study  markets  and  campaign  for  values. 

The  buyer  who  purchases  on  the  strength  of  his  supplier's 
reputation  will  sometimes  run  less  chance  of  making  errors  and 
is  always  more  certain  of  having  these  errors  corrected  for  him 
than  when  he  buys  by  specification  regardless  of  reputation. 
For  this  reduction  of  risk,  however,  he  pays  the  premium  the 


SETTING  STANDARDS 


supplier  must  charge  to  eover  the  insurance  for  which  his  reputa- 
tion stands. 

Purchase  from  favorably  known  firms  does  not  mean  buying 
by  guesswork,  but  it  does  mean  buying  on  faith.  In  emergencies, 
or  for  those  supplies  and  materials  which  specifications  and  tests 
fail  to  cover,  it  is  as  a  rule  the  best  method.  So  the  wise 
manufacturer  when  in  doubt  buys  the  well-known  brand  thor- 
oughly backed  with  reputation,  but  the  wisest  manufacturer 
seeks  economy  by  having  specialists  draw  up  specifications  as 
largely  as  possible  for  all  materials  and  lay  down  tests  by  which, 
when  received,  it  can  be  determined  if  purchases  conform.  As 
the  manufacturer  in  this  way  matches  his  true  requirements 
against  the  market  with  precision,  he  determines  scientifically 
and  perhaps  once  for  all,  that  balance  which  assures  a  product 
of  the  lowest  cost  with  the  highest  quality  and  the  best  service 
he  can  give  his  customers.  Thus  he  equips  his  purchasing  agent 
with  an  exact  knowledge  of  what  is  required,  and  so  places  him 
that  he  can  safely  contract  for  it.  If  in  addition  he  makes  it 
the  definite  duty  of  someone  to  keep  all  specifications  up  with 
changing  needs  and  changing  markets,  guesswork  on  the  pur- 
chasing end  is  eliminated  perhaps  as  far  as  is  humanly  possible. 

How  materials  are  being  tested  and  standardized  by  craftsman 
tricks  and  "kitchen"  laboratory  methods  in  the  small  shop  and 
in  the  large  plant  through  its  costly  laboratories,  research  depart- 
ments, high-salaried  specialists  and  exact  specifications,  is  told 
in  the  following  three  chapters. 


X 

PROVING  MATERIALS  IN 
THE  FACTORY 


RECALLING  boyhood  memories,  a  city  man  recently  visited 
the  little  woodworking  plant  where  as  a  youngster  he  had 
nailed  cases.  While  he  was  waiting  to  meet  the  son  of  his 
former  employer,  he  saw  one  of  the  workmen  open  a  dry  kiln 
and  draw  out  a  board  from  the  center  of  the  pile  on  one  of  the 
bunks. 

But  the  expected  did  not  happen.  The  workman  did  not  smell 
the  board  to  see  if  it  was  dry.  Instead  he  took  it  to  the  nearby 
saw  room,  sawed  it  in  two  and  cut  out  a  little  section  from  the 
center  of  the  board,  marking  on  the  chip  the  number  of  the 
bunk. 

The  city  man  was  curious.  This  wasn't  the  way  they  used 
to  test  lumber,  so  he  followed  the  workman  to  the  superin- 
tendent's office,  wondering  what  he  was  going  to  do  with  that 
little  piece  of  wood. 

Taking  the  bit  of  board,  the  superintendent  weighed  it  in  a 
pair  of  apothecary  scales  and  told  the  man  to  put  it  in  the  steam 
chest,  first  marking  the  weight  on  a  slip  of  paper  and  hanging 
it  on  a  numbered  hook.  After  being  thoroughly  dried  over  the 
steam  radiator  or  in  the  steam  chest,  so  the  former  shipping  boy 
learned,  the  block  would  be  weighed  again.  If  it  lost  six  per 
cent  of  its  weight  it  was  not  yet  sufficiently  seasoned  to  be  made 
into  desks. 

The  visitor,  out  of  touch  with  improved  methods,  had  happened 
upon  an  instance  of  the  rough  and  ready  application  of  science 
which  makes  every  up-to-date  factory  somewhat  of  a  laboratory 
in  its  study  of  materials.     Especially  in  the  small  plant,  where 


100 SETTING   STANDARDS 

it  is  not  feasible  to  maintain  special  installations  for  testing 
purposes  or  to  retain  the  services  of  industrial  specialists,  the 
manufacturer  is  striking  a  sound  compromise  between  science 
and  rule  of  thumb,  by  which  he  gets  most  of  the  advantages 
of  the  former  at  a  first  cost  not  much  greater  than  that  of  guess- 
work. The  ''hundred  thousand  dollar  hill"  by  which  a  great 
automobile  plant  simulates  costly  road  tests  may  be  out  of  the 
question  for  your  shop,  but  you  can  still  make  many  homely 
applications  of  the  same  scientific  principles  in  your  study  of 
materials  to  be  bought.  Microscope  and  micrometer,  test  tube 
and  acid  no  longer  need  mystify  the  manufacturer.  It  is  often 
a  simple  matter  to  analyze  and  know,  as  did  the  superintendent 
of  the  woodworking  plant,  instead  of  merely  guessing. 

First  challenging  the  way  the  buying  "always  has  been  done," 
manufacturer  and  purchasing  agent  accumulate  all  such  quick 
and  inexpensive  tests  they  can  learn.  Salesmen,  other  buyers, 
outside  specialists  and  the  literature  covering  the  field  afford 
them  many  such  suggestions.  Closely  watching  materials 
throughout  the  processing  is  always  instructive  as  to  standards 
and  short  cuts.  Whatever  else  is  done  or  omitted,  however,  the 
wise  manufacturer  will  allow  no  important  material  to  go  into 
the  shop  routine  without  first  submitting  it  to  a  "service  test." 
This  is  simply  a  reproduction  of  service  conditions,  by  which 
you  can  determine  with  finality  whether  or  not  a  material  stands 
up  or  how  the  various  materials  available  compare  in  endurance. 

Service  tests  are  often  of  the  simplest  and  least  expensive. 
Yankee  ingenuity  at  once  suggests  water  as  a  test  for  certain 
belts,  gloves,  cement  or  paint.  For  almost  every  material,  similar 
proof  can  be  devised.  Regard  for  this  single  principle  of  making 
a  sample  undergo  a  skillful  imitation  of  the  service  the  material 
must  withstand  will  usually  enable  the  purchasing  agent  to 
crowd  guesswork  almost  out  of  the  reckoning.  Whether  or  not 
laboratory  procedure  also  will  be  worth  while  depends  on  the 
conditions. 

Laboratory  tests,  moreover,  are  by  no  means  an  infallible  guide. 
A  stove  foundry  several  years  ago  inaugurated  the  policy  of 
blacking  all  cast-iron  stoves.  Brand  after  brand  of  blacking  was 
tried,  but  for  some  reason,  none  of  them  seemed  to  stick.  Finally, 
a  specialist  was  brought  in.    Schooled  in  the  scientific  approach, 


FACTORY  TESTS  101 


he  did  not  accept  as  final  the  conclusion  that  because  a  brand  of 
blacking  failed  to  stick,  the  blacking  itself  was  at  fault.  The  high 
speed  at  which  the  buffing  wheel  was  running  challenged  his  at- 
tention, and  he  began  to  experiment  with  different  speeds.  From 
fourteen  hundred  revolutions  per  minute  he  slowed  down  the 
wheel  finally  to  six  hundred  revolutions  per  minute,  at  which 
speed  the  blacking  took  hold  perfectly.  Here  was  a  case  where 
the  most  refined  laboratory  test  would  have  been  of  little  avail. 
The  conditions  of  use  were  the  determining  factor,  and  really 
the  only  accurate  gage  of  the  quality  of  different  brands  was  the 
speed  at  which  they  could  be  applied.  Some  would  work  with 
higher  speeds  than  others.  The  one  which  made  the  best  show- 
ing, appearance  and  other  things  being  equal,  was  finally  settled 
on  as  standard. 

Cotton-cloth  manufacture  furnishes  another  example  of  the 
value  of  service  tests  in  the  factory.  A  cotton  passed  by  a  lab- 
oratory as  superior  might  not  work  up  with  the  least  waste  or 
give  the  best  results  in  general.  A  poorer  appearing  cotton  fre- 
quently proves  up  better  in  the  end.  A  mill  was  operating  suc- 
cessfully with  a  cotton  on  which  the  percentage  of  waste  seemed 
a  bit  too  high.  The  material  was  slightly  off-color,  but  it  worked 
up  well  and  production  ran  smoothly.  Finally,  a  new  lot  of 
cotton  was  brought  to  the  superintendent's  attention.  He  was 
given  the  choice  of  using  this  or  sticking  to  the  old  grade.  As  the 
new  kind  was  white  and  apparently  free  from  foreign  matter, 
and  in  general  had  a  superior  appearance,  the  superintendent 
was  not  slow  in  making  his  choice.  But  it  proved  to  be  a  bad 
cotton  to  run.  It  had  little  strength,  it  spun  with  difficulty,  and 
the  waste  exceeded  that  on  the  old  grade.  Had  a  few  bales  been 
purchased  and  put  through  service  tests,  this  mill  would  have 
saved  itself  much  trouble  and  money.  A  form  employed  by  one 
cotton  mill  to  record  the  results  of  tests  for  preventage  of  waste 
is  shown  (Form  XXIV).  One  or  more  bales  of  each  of  the  dif- 
ferent brands  submitted  are  put  through  the  mill  and  careful 
account  is  kept  of  the  waste  at  each  stage.  "With  these  results 
before  him  and  a  knowledge  of  how  the  material  worked  up,  the 
superintendent  can  select  his  brand  with  almost  scientific 
assurance. 

So  it  is  with  many  of  the  materials  and  supplies  used  in  man- 


102 SETTING   STANDARDS 

ufacturing.  Carefully  supervised  service  tests  in  the  factory, 
under  actual  working  conditions,  not  only  may  be  the  simpler 
and  less  expensive,  but  may  furnish  a  proof  not  possible  in  the 
laboratory,  except  at  the  cost — often  great — of  duplicating  actual 
conditions.  Laboratory  tests,  however,  are  frequently  of  value 
in  addition. 

A  vehicle  factory  in  buying  glue,  for  instance,  first  makes  the 
glue  do  actual  service  in  the  shop.  Sample  pieces  of  wood  are 
glued  together  with  the  different  glues  and  tried  for  strength, 
sweetness  and  appearance.  With  the  glues  which  lead  in  these 
tests,  laboratory  experiments  are  made  by  a  glue  specialist  as  a 
check  on  the  factory  tests.  Samples  of  glue  marked  with  key 
numbers  are  sent  to  him  and  he  compares  his  findings  with  the 
shop  results.  The  cost  of  the  shop  tests  is  insignificant  compared 
with  the  sum  paid  under  the  yearly  glue  contract.  The  labora- 
tory work  is  simplified  and  the  product  is  doubly  safeguarded. 

COMPAEATIVE  SERVICE  TESTS  REVEAL  AND  ASSURE 
THE  DESIRED  QUALITY 

A  S  proper  treatment  in  the  manufacture  of  some  materials 
means  almost  as  much  in  the  finished  product  as  the  com- 
position, comparative  service  and  exposure  tests,  rather  than 
chemical  analysis,  are  often  of  the  first  importance  if  the 
purchaser  is  to  be  assured  the  best  value.  The  service  test  may 
be  a  check  on  both  the  chemistry  and  the  physics  of  the  material. 
A  New  York  furniture  manufacturer  places  a  high  value  on 
such  a  plan.  Never  absolutely  sure  of  his  varnish,  he  could  not 
guarantee  it  to  be  weatherproof  in  every  instance.  One  day  he 
went  through  an  implement  plant  in  the  Middle  West.  When 
he  returned  home,  he  took  with  him  the  solution  of  his  difficulty 
— a  "lif table"  test  for  weatherproof  varnish. 

The  test  is  simple.  Take  a  dry  wooden  panel  of  any  convenient 
size,  apply  the  varnish,  allow  it  to  dry,  lay  a  wet  sponge  on  it 
and  inspect  from  time  to  time.  Cheap  varnishes  containing 
rosin  in  large  proportions  will  soon  be  effaced.  Durable  and 
weatherproof  varnishes  will  not  be  affected  seriously  for  hours. 
If  the  test  is  begun  in  the  evening  and  the  varnish  is  destroyed 
by  the  following  morning,  a  new  test  with  frequent  inspections 
is  made.    But  if  no  serious  effect  is  noticeable,  the  tests  are 


FACTORY  TESTS 


103 


continued  until  the  weatherproof  qualities  of  the  different  samples 
appear  decisively.  In  such  tests,  a  material  of  known  quality 
is  usually  included  to  furnish  a  standard  for  comparison. 

With  this  test  as  a  guide,  the  furniture  manufacturer  now 
revises  his  varnish  standards  constantly.  "When  a  varnish 
contract  is  to  be  let,  he  writes  to  several  houses  for  samples. 
As  these  are  submitted,  he  tests  them  in  comparison  with  the 
standard  varnishes  of  past  years.  Not  infrequently  he  betters 
his  purchase  not  only  in  quality  but  also  in  price.  And  as  each 
varnish  becomes  the  standard,  it  also  faces  similar  competition 
the  coming  year. 


Mill  No      9 

WASTE  TEST 

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FORM  XXIV:     By  putting  several  bales  of  cotton  through  the  mill  at  different  times  and  keeping 
track  of  the  waste  made  during  every  process,  averages  were  found  for  the  various  tests.     As  a  result, 
standards  of  waste  for  the  different  departments  were  obtained 

Not  only  does  the  service  test  enable  a  manufacturer  to  im- 
prove his  material  from  one  contract  to  the  next,  but  it  also 
enables  him  to  measure  the  value  of  new  and  unfamiliar  materials 
in  comparison  with  materials  which  have  become  standard.  When 
important  new  sources  of  supply  open,  specifications  often  must 
be  altered  or  abandoned.  The  service  test  indicates  to  the  pur- 
chasing agent  whether  or  not  the  new  material  merits  considera- 
tion. Frequently  these  shop  tests  draw  distinctions  which  even 
the  laboratory  fails  to  catch. 

A  few  years  ago  the  first  principle  in  the  purchase  of  oil  was 


104 SETTING  STANDARDS 

' '  buy  to  specification. ' '  Anti-friction  specialists  were  well  agreed 
that  the  quality  and  bearing  value  of  oils  could  be  determined 
accurately  by  their  gravity,  flash,  fire,  cold  and  viscosity  tests. 
But  as  new  crudes  with  different  chemical  and  physical  prop- 
erties have  come  on  the  market,  buying  to  specification  is  admitted 
to  be  less  dependable  as  a  guide  to  oil  values.  While  the  old 
tests  draw  true  comparisons  among  oils  produced  from  the  same 
crude  petroleum,  they  are  not  final  as  standards  for  oils  refined 
from  different  crudes,  as  the  Pennsylvania  or  paraffin-base  oils, 
in  competition  with  oils  from  the  western  and  southwestern 
crudes  which  have  recently  appeared.  The  latter  are  being 
marketed  on  the  basis  of  shop  results;  the  former  still  on 
specifications.  So  the  purchase  of  lubricants  is  an  instance 
where  the  dependable  policy  is  to  make  sure  of  actual  service 
before  buying.  Each  plant  more  or  less  presents  an  individual 
oil  and  lubrication  problem. 

Sometimes  shop  tests  are  the  sole  means  for  insuring  quality. 
Among  the  supplies  for  which  a  manufacturer  of  electrical  goods 
has  found  it  impracticable  to  write  specifications  are  various 
abrasive  papers  and  cloths.  After  an  investigation,  shop  tests 
were  established  as  a  means  of  choosing  among  four  well-known 
makes. 

Even  where  exact  and  successful  specifications  exist,  they  will 
usually  include  shop  tests  which  assist  the  inspectors  in  checking 
on  deliveries.  The  more  exacting  are  the  quality  standards  of 
the  shop,  the  more  extensive  must  these  service  tests  be.  In 
automobile  manufacture,  for  example,  the  strength  and  quality 
of  the  materials  must  be  known  to  a  certainty,  for  a  weak  part 
may  mean  a  serious  accident. 

A  group  of  testing  machines  at  the  Ford  plant  appears  on 
page  109.  Here  tension,  compression,  torsion,  hardness,  in  fact 
all  the  strength  qualities  of  materials,  are  studied  and  measured. 
After  formulas  have  specified  what  composition  should  supply 
these  qualities  in  the  desired  degrees,  experiments  judge  whether 
the  qualities  have  actually  been  developed.  In  the  foreground 
of  the  photograph  an  automobile  front  axle  is  shown  under  a 
torsion  test  which  is  designed  to  reproduce  and  exaggerate  actual 
road  conditions. 

How  a  manufacturer  can  obtain  laboratory  results  in  testing 


FACTORY  TESTS  105 


materials  with  simple  and  also  inexpensive  equipment  is  well 
illustrated  by  the  precautions  which  the  manufacturers  of  a  high 
grade  computing  mechanism  take  in  making  sure  of  the  quality 
of  the  material  purchased.  Standards  for  cold  rolled  steel,  for 
example,  are  maintained  by  the  following  tests: 

1.  The  surface  of  the  steel  is  examined  under  a  magnifying 

glass  for  pits  and  scale,  and  the  edges  for  seams. 

2.  The  micrometer  is  applied  to  determine  the  thickness. 

3.  Density  and  grain  are  ascertained  by  cutting  off  a  small 

piece,  bending  it  back  upon  itself,  beating  the  bent  edge 
with  a  hammer,  working  the  steel  back  and  forth  until  it 
breaks  and  finally  examining  the  broken  edges  with  a 


4.  To  test  the  hardness  a  small  piece  of  flat  steel  is  hammered 

upon  the  anvil  of  a  scleroscope. 

5.  Blanks  are  punched  in  a  die  and  the  cut  edges  examined 

for  color,  grain,  seams  and  density. 

6.  As  a  final  test,  the  steel  is  given  a  sharp  right  bend,  after 

which  the  workman  examines  it  with  a  powerful  glass. 

No  manufacturer  can  excuse  continued  guesswork  in  the  selec- 
tion of  materials,  in  the  wording  of  the  purchase  contract,  or  in 
the  inspection  of  incoming  stores,  when  tests  as  simple  and  as 
helpful  as  these  can  be  applied  to  almost  every  material  he  buys 
in  quantity.  His  own  ingenuity,  if  called  into  play  and  spurred 
by  what  other  plants  are  doing,  will  suggest  how  a  material  can 
be  made,  as  one  superintendent  said,  "to  live  a  year  in  a  day." 
As  he  is  warranted  in  standardizing  still  further,  the  manufac- 
turer will  naturally  seek  the  advice  of  industrial  laboratories 
and  perhaps  install  certain  scientific  testing  processes  in  his  own 
plant.  How  most  large  corporations  now  maintain  their  stand- 
ards for  all  important  materials  and  processes  (Frontispiece,  and 
Pages  92, 109, 110, 127  and  128)  is  well  illustrated  by  the  practice 
of  the  Western  Electric  Company. 

Any  piece  of  apparatus  that  fails  in  the  slightest  particular 
to  reach  the  specified  standards,  the  inspection  and  engineering 
departments  of  the  company  will  not  accept  from  the  manu- 
facturing branch.  The  manufacturing  branch,  therefore,  must 
protect  itself  by  tests  which  indicate  the  quality  of  all  raw 
materials  with  precision.     The  magnet  of  a  telephone  receiver 


106 SETTING  STANDARDS 

capable  of  catching  the  feeble  impulses  from  a  voice  three  thou- 
sand miles  away,  and  reconstructing  them  into  faultless  speech 
must  not  merely  be  a  good  magnet — it  must  be  a  practically 
perfect  magnet.  Expert  workmanship  must  be  expended  upon 
absolutely  first  grade  materials.  The  factory,  therefore,  subjects 
its  magnet  steel  to  rigid  tests.  Samples  from  every  shipment  are 
first  analyzed  by  the  company's  chemists  and  if  the  composition 
is  found  to  differ  from  the  close  requirements  of  the  specifica- 
tions, the  shipment  is  rejected.  If  this  test  is  safely  passed, 
intensified  service  tests  to  which  the  material  is  always  submitted 
in  the  shops  may  still  develop  a  flaw.  If,  finally,  the  rejected 
magnets  reach  ten  per  cent  of  the  total,  the  shipment  of  steel 
goes  back  to  the  supplies. 

Another  company  maintains  its  paint  and  varnish  standards 
largely  by  means  of  the  film-testing  machine  shown  on  Page  110. 
This  device  measures  the  strength  and  elasticity  of  films.  The 
numerals  designate  parts  as  follows:  (1)  counter-balance  for 
iron-rod,  (2)  switch  controlling  magnet  No.  8,  (3)  switch  con- 
trolling magnet  No.  4,  (4)  magnet  controlling  mercury  shut-off, 
(5)  shut-off  handle  of  stop-cock  for  mercury,  (6)  cork  float 
fastened  to  iron  rod  to  indicate  the  height  of  mercury,  (7)  glass 
graduate  burrett  for  mercury,  (8)  electro-magnet  to  hold  iron 
rod  when  film  breaks,  (9)  brass  plates  for  holding  the  film,  (10) 
dry  cells  for  furnishing  current  for  electro-magnets  when  film 
breaks,  and  (11)  pulley  for  counter-balance  control.  The  paint 
and  varnish  films  are  stretched  between  the  two  brass  plates 
(9)  both  of  which  have  holes  in  the  center.  Mercury  is  allowed 
to  run  into  the  lower  glass  tube.  When  the  weight  of  the  mercury 
breaks  the  film  an  electrical  contact  is  established,  and  the  flow 
is  instantly  stopped.  The  difference  in  the  readings  of  the  height 
of  the  mercury  in  the  tube  (7)  gives  the  strength  of  the  film 
in  cubic  centimeters  of  mercury.  This  strength  is  then  readily 
computed  in  ounces  or  pounds  per  square  unit  of  surface.  Once 
standards  are  obtained,  samples  can  quickly  be  tested. 

Wherever  ingenuity  can  intensify  service  conditions  and  thus 
apply  a  severe  service  test  in  a  short  time,  this  plan  with  due 
care  to  maintain  an  unvarying  basis  for  comparison,  will  prove 
the  materials  sufficiently  for  routine  needs. 


XI 

OUTSIDE  HELPS  IN  SETTING 
STANDARDS 


SHORT  cuts  in  chemistry  and  service  tests  of  purchases  will 
usually  keep  materials  working  smoothly  fifty-one  weeks 
in  the  year.  It  is  not  difficult  to  maintain  the  inspection 
routine,  once  the  scientific  formula  or  trade  secret  is  learned, 
even  if  the  tests  involve  some  laboratory  ' '  magic. ' '  In  the  other 
week,  however,  because  of  some  change  in  the  routine  or  some 
unexplained  difference,  materials  or  supplies  may  cause  as  much 
trouble  and  far  more  perplexity  than  a  wrench  in  a  machine. 

At  such  times — when  standards  prove  ineffective  or  new  stand- 
ards are  called  for — the  manufacturer  has  several  important 
outside  resources  upon  which  he  can  draw  for  information.  First 
among  these  resources,  is  the  customer,  the  man  who  uses  the 
goods  into  which  the  material  goes.  Watching  service  tests  is 
his  daily  occupation. 

Next  is  your  own  sales  force — the  edge  of  contact  with  the  cus- 
tomer, and  often  the  means  whereby  the  user 's  criticism  is  inter- 
preted and  transmitted  to  the  factory.  While  the  judgment  of 
neither  can  be  classed  as  "scientific,"  their  common-sense  analy- 
sis of  flaws  and  their  causes,  if  given  due  consideration,  fre- 
quently puts  the  factory  on  the  trail  of  the  real  difficulty.  Occa- 
sionally the  exceptional  consumer  is  found,  whose  special  training 
and  knowledge  enable  him  to  put  his  finger  on  the  trouble 
while  even  your  inspectors  are  still  groping.  When  stimulated 
by  contact  with  the  trade,  moreover,  salesmen  with  technical 
training  and  shop  experience,  sometimes  of  their  own  initiative, 
bring  up  points  in  advance  of  any  definite  complaint,  which  are 
of  the  utmost  value  to  the  factory  whose  aim  is  always  to  be  at 
least  one  step  in  the  lead. 


108 SETTING   STANDARDS 

The  laboratory  specialist  is  also  available  in  any  large  city — 
and  not  only  does  he  usually  understand  the  science  back  of  the 
rule  of  thumb,  but  he  also  has  the  specialized  equipment  required 
for  analysis  of  materials,  and  is  a  student  of  the  experience  of 
other  manufacturers  in  similar  lines.  Finally  there  are  trade 
and  association  records  and  publications  to  consult.  Standards 
for  materials  in  many  factories  today  represent  this  combined 
experience  of  manufacturers,  consumers,  salesmen  and  con- 
sulting chemists  or  engineers. 

Often  the  crisis  develops  in  the  sales  department,  and  its  cause 
is  traced  back  to  the  purchasing  office  only  after  following  out 
many  false  leads  in  the  shop.  Complaints  from  Australian 
consumers  drifted  back  to  an  American  manufacturer  with  in- 
creasing frequency  a  few  months  after  he  had  reached  out  into 
the  foreign  market.  The  gist  of  the  complaint  was  that  the 
japan  used  in  coating  brass  tubing  was  scaling.  The  manufac- 
turer ordered  a  thorough  investigation.  He  expected  to  find  that 
some  shipment  of  japan  had  not  been  up  to  standard. 

But  the  report  of  the  investigators  showed  the  difficulty  to  be 
due  primarily  to  climatic  conditions  and  suggested  that  indica- 
tions of  the  same  trouble  but  of  less  severity  ought  to  show  in 
this  country.  This  proved  to  be  true.  Having  but  little  competi- 
tion, the  concern  had  developed  its  domestic  business  without 
any  effort  to  capitalize  the  experience  of  consumers  in  improving 
the  product.  Substitution  of  steel  for  brass  tubing  remedied  the 
trouble,  as  the  japan  did  not  easily  disintegrate  when  coated 
on  the  former.  Since  then,  the  president  has  insisted  also  upon 
a  monthly  complaint  report.  Through  this  analysis  of  complaints 
and  the  solicitation  of  suggestions  from  consumers  for  improving 
quality,  he  has  been  able  to  make  several  profitable  changes  in 
his  product. 

Every  complaint  which  is  received  is  recorded  upon  a  special 
form,  and  copies  are  sent  to  the  various  officials  interested.  The 
manufacturing  department  compiles  these  complaints  and  a 
comparative  chart  is  placed  before  the  president  each  month. 
In  this  manner  he  is  enabled  to  keep  his  finger  upon  the  defects 
of  his  product.  Because  one  customer  writes  a  caustic  letter 
regarding  his  purchase  does  not  necessarily  indicate  that  the 
design  or  material  is  wrong.     By  means  of  the  comparative 


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Material  testing  is  here  shown.  At  the  top  is  the  laboratory  of  the  S.  Obermayer  Company.  Just 
below  is  a  group  of  special  testing  machines  at  the  Ford  plant,  showing  an  automobile  front  axle 
undergoing  the  torsion  test.  At  the  bottom  is  the  laboratory  of  Durand  &  Kasper,  where  Dr.  Lloyd 
passes  upon  foodstuffs  which  are  sold  under  exact  specifications  to  the  United  States  Government 


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Intensive  service  tests  quickly  determine  the  lasting  qualities  of  many  materials.     Below  are  shown 

comparative  tests  of  seven  brands  of  varnish,  six  of  which  in  varying  degrees  have  turned  white. 

At  the  right  above  is  shown  a  filmometer,  by  means  of  which  the  strength  of  the  paint  film  is  accurately 

measured.     At  the  left,  a  painted  sheet  of  metal  has  undergone  a  long  time  brine  test 


OUTSIDE   HELPS  111 


complaint  chart,  however,  the  executive  can  see  at  a  glance  what 
is  causing  the  most  trouble. 

A  sudden  unexplained  variation  in  the  action  of  his  material 
generally  sets  the  wise  manufacturer  to  investigating  or  con- 
sulting a  specialist.  And  the  explanation  often  has  a  cash 
value. 

What  looked  to  him  like  an  excellent  opportunity  to  improve 
his  product,  and  thereby  fight  sudden  and  dangerous  competition, 
was  accidentally  discovered  by  the  superintendent  of  an  eastern 
brickyard.  Clay  from  a  new  quarry  had  been  used  for  a  batch 
of  bricks,  and  instead  of  the  standard  red  they  have  come  out 
in  variegated  colors. 

To  discard  both  the  lot  and  the  clay  was  the  foreman 's  impulse, 
but  the  superintendent  possessed  an  artistic  eye  and  the  imagina- 
tion which  can  see  far-reaching  possibilities  in  an  innovation. 
Instead  of  condemning  the  bricks,  he  ordered  them  put  on  the 
market  as  fancy  building  material.  The  ' 'tapestry"  bricks 
proved  at  once  an  effective  weapon  against  the  encroachments 
of  cement,  which  had  become  a  rival  of  brick  for  dwelling 
houses  largely  because  of  its  decorative  possibilities. 

The  clay,  however,  proved  to  be  far  from  constant  in  quality. 
The  colors  of  the  fancy  bricks  were  not  dependable,  and  archi- 
tects who  had  specified  a  certain  shade  from  samples  of  the 
first  lot  shown,  would  not  accept  the  off-color  ones  which  in 
several  instances  were  shipped  to  them.  As  a  result,  the  super- 
intendent had  a  chemist  analyze  the  clay  and  make  various  tests 
to  discover  what  metals  or  other  impurities  in  it  caused  the 
different  shades  of  color.  He  then  had  specifications  drawn 
up  for  the  various  colored  brick,  and  thereafter  mixed  his 
common  clay  with  the  materials  necessary  for  any  desired  shade. 
To  guarantee  the  color  absolutely  was  the  next  step. 

This  is  only  one  of  the  many  problems  connected  with  material 
standards  that  are  constantly  being  solved  by  factory  managers 
in  cooperation  with  industrial  chemists.  Managers  are  finding 
that  chemical  action  may  be  harnessed,  just  as  other  natural 
forces  have  been.  Nor  is  it  necessary  to  run  a  big  laboratory 
under  heavy  expense,  in  order  to  reap  the  benefits  of  a  proper 
application  of  chemical  forces.  In  a  case  where  coal  is  bought 
on  a  basis  of  thermal  units  delivered,  the  manager  of  the  plant 


lie SETTING  STANDARDS 

simply  saves  a  small  sample  from  each  day's  delivery;  at  the 
end  of  the  month  he  has  these  samples  thoroughly  mixed  and 
sends  a  five  or  ten  pound  batch  to  the  chemist  for  analysis  and 
rating. 

USING  MATERIALS  UNSUITED  TO  EACH  OTHER 
RESULTS  FINALLY  IN  A  LOSS  OF  TRADE 

C^REQUENTLY  the  purchasing  agent  learns  that  his  whole 
trouble  with  an  item  comes  from  using  materials  that  are 
chemically  unsuited  to  each  other,  as  in  the  case  of  a  Chicago 
tanner.  This  man  had  learned  his  business  in  England,  in  a 
tannery  where  at  that  time  they  used  the  old-fashioned  method 
of  immersing  hides  in  the  tanning  pits  with  raw  oak  bark.  But 
although  it  insured  an  excellent  grade  of  leather,  he  had  found 
this  method  too  slow  to  enable  him  to  keep  pace  with  his  Ameri- 
can competitors,  and  he  had  been  trying  various  tanning  extracts 
instead.  Most  of  these  liquors  are  made  by  extracting  the  tannin 
from  oak  or  hickory  bark  and  are  supposed  to  do  by  quick,  direct 
action  what  the  raw  bark  does  much  more  slowly.  The  successive 
stages  of  tanning,  however,  require  a  varying  amount  of  tannin 
and  the  Englishman  had  been  unable  to  adjust  the  amounts 
of  liquor  used  so  as  to  get  a  soft,  well  finished  skin. 

"I'll  admit  it's  a  quicker  process,"  he  said,  "but  what  good 
does  that  do  me  if  the  leather  comes  out  as  hard  as  a  board? 
Smith  [a  rival  tanner]  treats  his  hides  with  grape  sugar,  I 
understand,  and  they  look  all  right,  but  they  won't  wear;  and 
I  will  not  turn  out  poor  leather.  What's  more,  I  haven't  been 
able  to  get  a  perfectly  dyed  skin  since  I  started  using  this  ooze 
instead  of  bark." 

Could  hides  be  chemically  treated  so  as  to  give  good  leather? 
was  the  first  question.  The  chemist  solved  it  by  insisting  on  a 
definite  per  cent  of  tannic  acid  in  the  ooze,  or  liquor  purchased. 
This  specification  involved  careful  analysis,  but  at  length  he 
found  a  maker  who  could  be  depended  upon  to  "deliver  the 
goods"  and  give  a  standard  agent  to  work  with.  Then  by  start- 
ing the  tanning  in  vats  filled  with  a  weak,  dihited  solution  of  the 
liquid,  and  gradually  increasing  the  proportion  in  successive 
pits,  the  chemist  reproduced  the  process  as  it  takes  place  in 
the  pits  with  the  raw  bark. 


OUTSIDE  HELPS  113 


Dyeing  the  hides  presented  still  another  problem.  Dyes 
which  gave  good  results  with  hides  tanned  with  oak  bark  were 
uncertain  or  worse  when  used  in  conjunction  with  the  tan  liquor. 
The  trouble  must  therefore  lie  in  the  reaction  among  the  chemi- 
cals in  the  dye  and  those  in  the  tannic  acid  solution.  It  developed 
that  a  reagent  in  the  liquor  and  one  in  the  dye  were  neutralizing 
each  other  and  thus  preventing  the  action  of  the  dye  on  the 
leather.  The  chemist  sought  for  a  solution  which  would  carry 
the  dye  and  not  have  an  affinity  for  the  tanning  liquor.  After 
a  little  experimenting  he  found  such  a  solution  and  ascertained 
as  well,  that  another  make  of  dyes  already  on  the  market  showed 
the  same  analysis  as  the  solution  he  had  developed.  Being  thus 
assured  a  supply  of  a  standard  tanning  agent  and  of  dyes  that 
were  chemically  harmonious  with  it,  the  tanner,  who  was  an 
expert  in  the  handling  of  leather,  had  no  difficulty  in  turning 
out  as  good  leather  as  with  the  raw  oak  bark  and  his  home-made 
dyes. 

HOW  MIXING  METALS  BY  RULE  OF  THUMB 
HANDICAPPED  A  FOUNDRY 

"CTALLING  in  with  the  present  tendency  toward  standardized, 
cooperative  effort  rather  than  individual  expertness,  a  foun- 
dryman  sought  out  a  commercial  laboratory  not  long  ago.  For 
twenty-five  years  the  metals  going  into  his  brass  castings  had 
been  proportioned  by  an  old  melter  who  had  grown  gray  in  his 
service,  and  it  had  never  occurred  to  the  foundryman  that  the 
younger  generation  was  not  receiving  such  training  as  would  fit 
one  of  them  to  take  the  old  man's  place.  To  his  great  surprise, 
after  the  melter 's  sudden  death,  he  had  found  it  impossible  to 
replace  him  with  anyone  who  had  adequate  experience  for  the 
job.  At  the  suggestion  of  a  fellow  foundryman  he  finally  came 
to  the  chemist  for  advice,  although  it  was  plain  that  he  placed 
more  dependence  on  the  old  man's  "rule-of -thumb"  method — 
a  method  based  on  an  intuitive  skill  developed  through  years 
of  costly  experiment — than  on  any  theoretical  knowledge.  His 
confession  of  his  difficulty  was  made  grudgingly  and  he  wound 
up  with: 

"But  I  won't  have  any  high-priced  chap  fresh  from  college 


114 SETTING  STANDARDS 

fooling  around  my  plant.  There  isn't  enough  work  in  that  small 
foundry  to  keep  him  busy,  even  if  I  did  want  him." 

Investigation  proved  that  he  was  right.  At  the  chemist's 
suggestion,  therefore,  the  manufacturer  made  a  contract  with 
a  large  foundry  which  specialized  in  brass  making,  by  which  he 
purchased  from  them  certified  brass  ingots  of  any  desired 
quality.  The  proportion  of  the  metals  in  the  brass  was  guar- 
anteed within  one  per  cent.  A  laboratory  certificate  and  analysis 
accompanies  every  shipment  of  ingots  and  assures  the  purchaser 
that  he  is  getting  just  what  he  specified.  The  smaller  foundry 
casts  the  remelted  ingots  and  machines  and  finishes  the  castings. 
In  the  old  days  its  brass,  roughly  classed  as  "red,"  "yellow" 
and  "white,"  was  at  the  best  rather  uncertain  in  quality.  Now 
the  shops  have  a  standardized  product,  of  any  grade  their 
customers  may  have  specified  for  their  castings,  and  that  at  less 
expense  than  in  the  days  when  they  made  their  own  blend. 

Often  the  manufacturer  can  further  save  himself  expense  and 
trouble  in  getting  information  as  to  a  material  by  enlisting  the 
aid  of  various  types  of  organizations. 

An  example  of  the  cooperative  efforts  of  those  concerned  in 
setting  material  standards  is  the  American  Society  for  Testing 
Materials.  Many  of  its  sub-committees  are  engaged  in  the  prepa- 
ration of  standard  specifications.  In  the  membership  of  each 
sub-committee  there  is  representation  from  manufacturers, 
consumers  and  consulting  engineers.  The  resultant  specification, 
therefore,  is  one  that  satisfies  the  man  who  makes  the  goods,  the 
man  who  uses  the  goods  and  the  designer  and  adviser.  Much 
information  can  also  be  obtained  from  the  published  works  of 
such  representative  bodies  as  the  National  Fire  Protection 
Association,  the  American  Chemical  Society,  and  the  Interna- 
tional Congresses  of  Applied  Chemistry. 

Standard  specifications  are  drawn  up  and  revised  from  time 
to  time  by  the  Association  of  American  Steel  Manufacturers. 
These  specifications  include  and  define  methods  of  manufacture, 
tests,  and  inspection,  in  addition  to  the  common  provisions  for 
insuring  quality.  They  are  complete  for  structural  and  sheet 
metal  and  various  miscellaneous  shapes  and  plates.  The  Ameri- 
can Railway  and  Maintenance  of  Way  Association  and  the  Mas- 
ter Car  Builders'  Association  also  issue  standard  specifications 


OUTSIDE  HELPS  115 


for  sheet  steels,  rails,  castings  and  equipment.  Many  important 
tests  are  made  the  subjects  for  work  of  sub-committees  appointed 
by  the  International  Petroleum  Commission.  The  National  Paint 
Manufacturers'  Association  also  collects  and  publishes  some 
valuable  information  in  regard  to  paints.  In  weather  tests  of 
paints,  for  instance,  it  found  that  the  colored  paints  were  better 
preserved  than  the  untinted  white  paints.  Color  seemed  to  reduce 
chalking,  checking  and  general  disintegration.  This  condition 
was  held  to  be  due  to  the  reinforcing  value  of  color  pigments. 

Most  fields  of  industry  have  such  trade  associations,  from 
which  the  manufacturer  can  obtain  aid  in  setting  standards  for 
his  purchasing,  production  and  inspection  departments.  The 
movement  has  no  doubt  been  accelerated  by  the  work  of  the 
Underwriters'  Laboratories  in  standardizing  fire-prevention  and 
fire-fighting  equipment. 

The  specifications  for  testing  followed  by  the  Laboratories 
chiefly  are  those  set  up  by  the  National  Fire  Protection  Associa- 
tion. This  is  a  body  composed  of  men  vitally  interested  in  the 
subject  of  fire  protection — insurance  men,  fire  marshals,  in- 
spectors, architects  and  engineers.  Between  it  and  the  National 
Board  of  Underwriters,  under  whose  supervision  the  Laboratories 
is  operated,  there  is  the  closest  cooperation. 

In  electrical  matters,  the  National  Electric  Code  is  followed. 
This  is  prepared  and  continually  is  being  revised  by  a  com- 
mittee of  the  National  Fire  Protection  Association  composed  of 
representatives  from  this  association,  the  National  Board  of 
Underwriters,  the  Associated  Factory  Mutual  Fire  Insurance 
Companies,  the  American  Institute  of  Electrical  Engineers,  the 
National  Electric  Light  Association,  the  American  Electric  Rail- 
way Association,  the  National  Electrical  Contractors'  Association 
and  the  National  Association  of  Electrical  Inspectors.  So  the 
association  represents  engineering  skill  very  broadly  and  is  in 
a  position  to  set  fair  and  practical  standards. 

Anyone  may  avail  himself  of  the  offices  of  the  Laboratories 
for  the  purpose  of  having  new  devices  tried  out.  But  only  when 
a  maker  submits  his  product  for  examination  in  accordance  with 
the  specifications  of  the  National  Fire  Protection  Association  or 
the  National  Electrical  Code  is  a  report  promulgated  broadcast 
to  the  trade. 


116 SETTING  STANDARDS' 

For  this  special  testing  a  small  charge  is  exacted,  which  merely 
covers  the  actual  expense  plus  operating  overhead.  The  time 
and  cost  depend  altogether  on  the  character  of  the  material  or 
appliance  submitted.  If  it  falls  within  the  province  of  existing 
standards  and  can  be  put  through  in  a  routine  manner,  the  time 
required  is  from  four  to  ten  days  and  the  cost  is  small.  If, 
however,  new  test  methods  must  be  originated,  involving  perhaps 
the  use  of  specially  designed  apparatus,  the  time  may  run  into 
months  and  the  cost  into  hundreds  of  dollars.  Any  investigation 
that  has  a  bearing  upon  the  fire  hazard  is  gladly  undertaken. 

To  illustrate  the  value  of  the  service  performed  on  occasion  by 
the  Laboratories'  experts,  this  instance  may  be  cited:  A  manu- 
facturer of  electrical  specialties,  desiring  the  underwriter's  ap- 
proval on  his  make  of  electric  flat-iron,  sent  in  a  sample  for  test. 
Now  irons  with  rest  attachments  are  tested,  among  other  points, 
for  length  of  time  the  iron  can  stand  on  its  rest  in  contact  with 
inflammable  material  without  setting  it  on  fire.  The  sample  sub- 
mitted proved  weak  in  this  respect.  Acting  on  the  suggestion  of 
the  test  engineer,  the  maker  lengthened  the  rest  attachment  and 
replaced  the  two  side  lugs  which  bore  against  the  hot  part  of 
the  iron  with  a  single  central  lug.  The  iron  then  passed  a  satis- 
factory test  in  every  respect.  While  the  chief  function  of  the 
laboratories  is  to  register  an  opinion  "yes"  or  "no" — "stand- 
ard" or  "substandard" — "approved"  or  "not  approved,"  the 
engineers  frequently  volunteer  constructive  criticism  of  this  sort 
which  is  of  real  value  to  manufacturers. 

Government  publications  also  prove  a  help  to  the  manufacturer 
in  specifying  materials.  The  scope  of  the  investigations  of  the 
Department  of  the  Interior  is  constantly  widening.  Of  the 
current  reports,  those  on  the  treatment  of  ores  and  metals,  and 
on  fuel  efficiency  have  unusual  value.  The  National  Bureau  of 
Standards  at  Washington  is  another  valuable  source  of  guidance, 
although  its  work  is  mostly  in  the  direction  of  setting  up  primary 
standards  for  private  and  commercial  laboratories  to  follow.  On 
the  various  supplies  used  by  the  government,  however,  it  carries 
out  tests  in  great  detail,  and  the  published  findings  are  available 
for  the  public.  Some  testing  for  private  persons  along  the  same 
line  is  also  done.  To  standardize  testing  and  measuring  instru- 
ments is  another  function  performed.    By  keeping  in  touch  with 


OUTSIDE  HELPS  117 


what  the  Bureau  is  doing,  as  well  as  by  familiarizing  himself  with 
the  kinds  of  devices  it  has  found  best,  the  manufacturer  can  avoid 
loading  his  factory  laboratory  with  inferior  and  unsuitable  test- 
ing equipment.  To  know  what  testing  methods  to  follow  and 
what  apparatus  to  use  is  vital  to  the  success  of  any  private 
laboratory.    The  Bureau  of  Standards  points  the  way. 

Finally  in  seeking  reliable  data  upon  his  materials,  the  manu- 
facturer may  well  examine  the  published  works  of  the  engineering 
experiment  stations  and  laboratories  of  our  universities  and 
educational  institutions.  They  are  paying  more  and  more  atten- 
tion to  manufacturing  needs  and  are  making  genuine  contribu- 
tions to  factory  practice.  They  will  always  conduct  special 
investigations  and  ordinarily  charge  only  nominal  fees  to  cover 
the  cost  of  the  materials  used  in  the  experiments. 

Moreover,  it  is  often  possible  to  arrange  with  the  college  au- 
thorities to  have  thesis  work  directed  into  some  channel  in  which 
the  manufacturer  seeks  information  that  will  help  him  set  up 
better  standards.  Even  more  valuable  are  the  results  that  may 
be  obtained  through  the  research  work  of  graduate  students, 
qualifying  for  advanced  degrees.  Some  practical  manufacturing 
problem  is  just  what  such  students  seek.  One  company  interested 
in  getting  the  rock-bottom  facts  in  regard  to  its  principal  ma- 
terial established  a  fellowship  at  a  large  eastern  technical  uni- 
versity for  this  specific  purpose,  and  its  chief  engineer  cooperated 
with  the  student  investigator  in  making  his  experiments.  The 
results  subsequently  were  published  in  the  technical  press  and 
also  were  made  the  subject  of  a  paper  read  before  a  national 
engineering  society.  Thus  everybody  interested  in  the  material 
in  question  shared  in  the  benefit. 

Technical  schools,  especially  the  larger  ones,  offer  unusual 
facilities  for  research  work  and  tests,  superior  even  to  what  the 
largest  manufacturing  establishments  can  afford.  Such  state 
institutions  as  the  Universities  of  Minnesota,  Illinois  and  Wis- 
consin are  very  closely  identified  with  the  industrial  as  well  as 
the  agricultural  interests  of  the  constituencies  that  support  them. 

Some  of  the  commercial  laboratories  also  offer  exceptional  facil- 
ities along  cooperative  lines,  supplementing  the  work  of  company 
laboratories  as  well  as  placing  at  the  disposal  of  small  manu- 
facturers the  advantages  of  the  large  in  the  inspection  and  test 


118 SETTING  STANDARDS 

Ox  purchases.  One  large  eastern  laboratory  maintains  private 
experimental  rooms  which  the  manufacturer  may  hire  at  a 
modest  rental  for  any  length  of  time  he  desires.  Here  he  can 
install  his  expert  for  some  special  test  and  while  conducting  it  in 
absolute  secrecy,  yet  have  all  the  facilities  of  the  institution  at 
his  command.  These  laboratories  are  patronized  by  such  con- 
cerns as  the  Western  Electric  Company  and  the  General  Electric 
Company,  which,  although  they  have  well  equipped  laboratories 
of  their  own,  yet  do  not  feel  justified  in  providing  the  equipment 
to  handle  every  special  test.  Moreover,  they  believe  it  good  policy 
to  check  up  their  own  results  occasionally  by  commanding  the 
resources  of  an  outside  corps  of  experts. 

Inspection  and  testing  of  materials  before  shipment  is  another 
service  undertaken  by  the  commercial  laboratories,  which  the 
manufacturer  himself  can  not  well  do  except  in  isolated  cases. 
This  plan  heads  off  unsatisfactory  material  at  the  supplier 's  fac- 
tory and  saves  the  purchaser  from  the  annoyance  and  expense  of 
returning  rejected  product.  When,  too,  the  quality  of  purchases 
can  be  determined  in  advance  of  receipt,  the  purchasing  agent 
does  not  need  to  allow  time  for  testing  on  the  premises  and  so  can 
work  closer  to  his  stock. 

In  setting  up  material  standards,  therefore,  outside  helps  play 
an  extremely  important  part.  Many  are  free  for  the  asking. 
Those  that  cost  really  justify  themselves  by  the  money  they  save ; 
indeed,  so  great  is  the  usual  gain  that,  speaking  in  general,  no 
manufacturer,  however  small,  can  afford  not  to  avail  himself  of 
them. 


XII 

HOW  TO 
DRAW  SPECIFICATIONS 


IN  every  specification  two  persons  are  vitally  interested,  the 
supplier  and  the  purchaser  of  the  material.  It  has,  in  fact, 
been  stated  that  a  specification  is  an  attempt  on  the  part 
of  the  consumer  to  tell  the  producer  what  he  wants.  As  a  result 
of  this  attitude,  the  early  specification  did  little  more  than  define 
"qualities  required  of  the  material."  A  rational  specification 
goes  beyond  this.  It  recognizes  the  tangential  interests  of  buyer 
and  seller,  and  crystallizes  buying  policy  at  many  points.  It 
states,  for  instance,  the  method  of  sampling,  tells  how  much 
material  one  sample  shall  represent,  prescribes  methods  of  test- 
ing either  in  whole  or  in  part,  the  size  of  the  test  samples,  and 
how  to  forward  samples. 

Other  questions  which  now  receive  the  attention  of  the  buyer 
are:  Would  it  not  be  advisable  to  buy  in  lots  of  the  same  size 
as  the  test  involves  ?  Shall  the  quality  of  the  shipment  be  deter- 
mined at  the  factory  where  the  material  is  made,  or  after  the 
shipment  is  received?  Factory  inspection  obviously  requires 
the  presence  of  the  buyer's  inspector  at  the  supplier's  factory. 
This  plan,  of  course,  is  not  encouraged  by  the  manufacturer 
who  has  in  his  plant  many  private  unpatented  processes  in 
operation.  He  has,  however,  less  reason  for  objecting  when  the 
buyer's  inspection  is  done  through  a  commercial  laboratory,  as 
mentioned  in  Chapter  XI.  For  the  laboratory's  experts  have 
only  the  one  interest  and  besides  can  usually  be  relied  on  not 
to  divulge  any  trade  secrets  they  inadvertently  discover.  More- 
over, their  work  is  equally  to  the  supplier's  advantage,  as  it  is 
calculated  to  save  him  the  expense  and  annoyance  of  taking  back 
goods. 


120 SETTING   STANDARDS 

Often  those  who  ultimately  receive  the  material  (the  store- 
keeper or  the  department  foremen)  can  make  certain  inspections 
better  and  cheaper  than  any  special  official.  This,  hence,  makes 
it  necessary  to  put  in  the  specification  the  proper  instructions 
for  such  inspections.  The  result  of  these  several  requirements 
is  that  a  modern  specification  is  in  many  instances  lengthy,  if  not 
at  times  unwieldy.  In  other  cases  it  would  almost  seem  that 
the  wording  could  be  more  definite,  for  some  manufacturers 
have  a  desire  to  deliver  the  lowest  possible  quality  on  a  contract, 
while  the  testing  chemist  and  engineer  endeavor  to  enforce  the 
specifications  to  the  letter. 

In  preparing  any  specification  the  aim  should  be  to  incorporate 
information  which  may  be  needed  by  (1)  the  seller,  (2)  the 
chemist  and  engineer  of  tests  or  other  inspectors,  (3)  the  ultimate 
user  of  the  material. 

The  first  step  to  be  taken  is  the  collection  of  information  from 
the  various  sources  already  discussed.  Samples  may  be  gathered 
from  the  works,  and  data  attached  thereto,  as  to  whether  the 
results  obtained  were  good,  fair,  or  bad.  The  chemical  and 
physical  properties  of  these  samples  are  carefully  noted  along 
with  their  price  and  date  of  purchase.  The  qualities  of  these 
materials  have  been  decided  by  actual  service.  Sometimes  the 
service  does  not  give  so  much  information,  or  it  takes  a  long 
period  to  determine  which  material  is  good  and  which  is  undesir- 
able. In  such  instances  a  "provisional  specification,"  on  the 
basis  of  general  knowledge,  is  issued  and  the  material  delivered 
is  carefully  watched  to  see  how  it  behaves,  as  has  been  described 
in  Chapter  X. 

Direct  positive  experiments,  in  some  cases,  are  made  with 
samples  which  have  been  obtained  and  analyzed,  or  with  material 
which  is  now  in  use  in  the  factory.  This  makes  it  possible  to 
obtain  more  complete  records  than  when  older  samples  are 
examined.  Those  products  which  fail  to  give  good  results  are 
very  carefully  examined,  in  order  that  their  objectionable  fea- 
tures or  faulty  constituents  may  be  ruled  out  when  the  specifica- 
tions are  finally  drawn. 

In  the  accumulation  of  information  it  is  desirable  to  pay  a 
visit  to  the  makers  of  the  materials,  and  learn  from  them  as  far 
as  possible  the  grade  or  quality  which  it  is  possible  to  maintain 


SPECIFICATIONS 


121 


8CHEDOLE  AKD  SPEOIBIDATIOK8-<Jontinned. 


QlUK 

Keo.u 


Wagons,  etc.- 

Wide  track,  equipped  with  h 
■teel  skein  and  Vox  brake— 

2&x  8  ins.,  Ures3x«  In- 
flates., tires l%x%  in. 


8x9ins.tiree8xKin 


3)^x11  ins.,  tires  4  x  »£  in. 


Of  each  segment  of  the  wheels.  All  gears 
to  be  bolted  together  with  single  bolts 
down  through  the  plates  of  the  sand 
bolsters,  the  center  of  hounds  and  axles, 
and  through  the  hooded  steel  skeins,  the 
flat  iron  bar.  and  brace  underneath.  The 
size  of  the  bolts  to  be  in  proportion  to 
the  size  of  the  wagons. 

Narrow  track  4  feet  6  inches,  wide 
track  5  feet. . 

The  sizes  of  tires  specified  above  are 


Bidders,  therefore, 
have  the  option  of  offering  others,  being 
careful  to  specify  in  their  bids  the  sizes 
they  propose  to  furnish. 
Sizes  of  bodies  to  be  as  follows: 


All  boxes  to  have  bow  staples. 

Wagons  to  have  one  priming  coat  and 
two  heavy  coats  of  paint  before  varnish- 
ing, and  to  be  subject  to  two  inspections, 
one  in  the  white  when  ready  for  painting, 
and  the  other  when  painted  and  ready  for 
shipment. 

Sample  of  8-inch  wagon  hi  the  white 
(8  x  H  INCH  tiees)  to  bepbksent  qual- 
ity Or  ALL  SIZES  OFFEBED  MUST  BE  SUB- 
MITTED BY  BIDDEBS. 

Separate  prices  are  invited  for— 


FORM  XXV:  When  the 
United  States  Govern- 
ment makes  a  purchase, 
all  the  requirements^  are 
carefully  and  definitely 
stated.  A  page  from  a 
typical  government  speci- 
fication sheet  is  here  re- 
produced. "Of  quality 
equal .  to  last  lot'  is  a 
type  of  loose  term  never 
found  in  such  specifica- 
tions, and  is  permitted 
less  and  less  in  the  speci- 
fications of  progressive 
manufacturers 


in  commerce  when  proper  precautions  are  used.  No  specifica- 
tions should  be  drawn  without  a  fair  knowledge  of  the  manu- 
facturing process  for  the  material. 

An  important  factor  which  enters  into  the  framing  of  specifi- 
cations  is   the   information   procured    from   experienced   men 


122 SETTING  STANDARDS 

as  to  the  characteristics  and  the  behavior  of  materials  which 
have  been  used  for  many  years.  Great  care  is  taken  by  large 
corporations  in  conducting  all  these  preliminary  investigations. 
One  company,  for  instance,  frequently  works  for  two  or  three 
years  before  printing  final  specifications. 

When  all  possible  information  has  been  accumulated,  it  is 
discussed  and  criticised,  and  a  "provisional"  specification  is 
framed.  All  information  which  is  not  strictly  relevant  to  the 
specification  is  omitted.  If  a  hitherto  untested  material  is  about 
to  be  bought  on  specification,  it  may  be  necessary  to  alter  the 
method  of  manufacture;  and  if  this  change  is  too  drastic,  the 
manufacturers  of  that  material  may  resist  any  attempt  at  de- 
livery on  specification.  This  is  a  state  of  affairs  which  distinctly 
is  to  be  avoided  by  the  buyer,  for  it  may  make  it  impossible  for 
him  to  supply  his  wants  in  the  market. 

After  the  preliminary  specification  is  drawn,  the  chief  chemist, 
the  chief  engineer,  the  technical  superintendent  and  the  pur- 
chasing agent  all  criticise  the  draft,  making  corrections  and 
suggestions,  eliminating  non-essentials  and  adding  necessary 
paragraphs.  The  printed  copy  is  placed  in  the  hands  of  the 
foreman  of  each  department  where  the  material  is  to  be  used. 
It  is  then  sent  to  all  those  manufacturers  of  the  material,  from 
whom  the  purchasing  agent  considers  buying.  In  every  case 
the  freest  possible  criticism  is  welcome. 

The  manufacturer's  criticism,  previous  to  the  final  publication 
of  a  specification,  is  today  regarded  as  a  most  important  part 
of  the  proceeding.  The  old  idea  that  the  consumer  was  to  dic- 
tate to  the  manufacturer  what  was  wanted,  has  given  way  to 
the  broader  view  that  the  specification  should  represent  the  best 
that  is  known  on  the  subject,  without  regard  to  the  source  of  the 
information.  To  make  a  "lopsided"  contract  is  unwise,  unfair 
and  certainly  short-sighted.  The  manufacturer  must  be  able  to 
see  that  he  has  actually  had  a  part  in  the  making  of  the 
specification. 

After  criticisms  are  received  from  all  those  qualified  to  criti- 
cise, the  provisional  specification  is  remodeled  so  as  to  include 
all  suggestions  which  are  of  actual  value.  In  some  cases  criti- 
cisms conflict,  but  this  is  frequently  due  to  local  conditions  and 
unimportant  details.    In  the  whole  procedure  there  is  one  pre- 


SPECIFICATIONS  123 


eminent  feature  that  seems  worthy  of  careful  consideration, 
namely — the  greater  the  care,  the  more  study  and  well-directed 
time  and  effort,  put  upon  the  specification  before  it  is  issued, 


STORING  DATA  FOR  SPECIFICATIONS 

STEEL  BARS 

1.  Our  regular  run  of  bars,  of  which  we  use  hundreds  of  tons 
each  year,  is  specified  by  us  as  Soft  Steel.  We  should  also  specify 
"In  15-  to  20-foot  lengths,"  unless  we  order  to  a  specified  or  to  a 
multiple  length. 

2.  The  next  grade  of  steel  would  probably  be  what  we  call  Dead 

Soft  Steel  to  Weld;  this  is  used  principally  for  such  items  as 

(a  list  of  the  articles  is  given). 

3.  We  also  use  what  is  known  as  Hard  Steel,  running  from  .20 
to  .30  Carbon  up  to  .50  to  .60  Carbon.     The  larger  percentage  of 

this  Hard  Steel  is  principally  .30  to  .40   Carbon  for .     This 

material  should  also  be  ordered  in  15-  to  20-foot  lengths,  unless  to 
a  specified  or  to  a  multiple  length. 

4.  Special  Note.— In  ordering  Soft  Steel,  Dead  Soft  Steel,  Plow 
Steel  (not  Plow  Steel  Shapes),  Spring  Steel,  Hard  Steel,  always 
bear  in  mind  the  following:  Do  not  specify  less  than  a  ton  if  the 
size  in  question  is  one  for  which  we  have  other  uses  and  of  which 
we  will  use  at  least  a  ton  a  year.  For  any  length  under  five  feet 
there  is  an  additional  charge  for  cutting,  for  any  quantity  under 
a  ton  there  is  an  extra  charge,  and  a  much  larger  extra  charge  if 
the  quantity  is  under  a  half  ton.  Whenever  it  is  necessary  to 
know  the  analysis,  either  chemical  or  physical,  the  steel  mills  will 
supply  test  sheets;  these,  however,  should  be  requested  in  the  order, 
otherwise  there  may  be  a  delay  in  securing  them. 

Scrap — Various  Grades — Purchased 

1.  Cast  Iron  Scrap.  There  are  numerous  grades  of  Cast  Iron 
Scrap.  The  best  quality  for  our  particular  work  is  secured  from 
broken  up  engine  frames,  fly-wheels,  pulleys,  and  other  scrap  of 
that  nature.  This  scrap  should  all  be  broken  up  into  what  we  call 
one-man  pieces,  or  pieces  which  one  man  can  handle  and  place  on  a 
truck  without  assistance.  This  kind  of  scrap  is  what  is  known  as 
Strictly  No.  1  Machinery  Cast  Scrap. 

2.  Next  to  this  comes  what  the  railroads  sell  as  Light  Cast  Iron. 
This  is  usually  axle  boxes,  bumpers,  and  so  on,  not  brake  shoes. 

3.  Special  Note. — There  are  three  grades  of  Cast  Iron,  and  the 
grade  governs  the  price;  that  is,  if  No.  1  Machinery  Cast  Scrap  was 
selling  at  $16.00  per  gross  ton,  delivered,  Plow  Casting  Scrap  would 
be  several  dollars  lower  per  gross  ton,  and  Stove  Plate  Scrap  would 
be  still  lower. 


FIGURE  VIII:    To  preserve  the  odds  and  ends  of  information  which  cannot  readily  be  distributed 

on  quotation  cards,  and  to  make  the  work  of  preparing  specifications  easier  for  a  substitute  or  successor, 

data,  such  as  that  shown,  was  collected,  item  by  item,  from  the  buyer's  personal  experience 

the  less  will  probably  be  the  difficulty  connected  with  it  after 
it  has  once  become  a  part  of  the  contract.  A  rational  specifica- 
tion represents  the  fruition  of  the  studies  of  those  who  investigate 


124 SETTING   STANDARDS 

the  properties  of  such  materials  and  those  who  handle  and  use 
these  commodities. 

Specification  drawing,  thus,  like  the  preparation  of  instruction 
cards  and  standard  instructions  for  the  guidance  of  the  factory, 
is  a  job  for  a  specialist.  Specifications,  in  fact,  are  standard 
instructions.  Therefore  it  is  essential  for  best  results  to  have 
some  one  man  in  the  organization  specially  qualified  along  this 
line.  Large  plants  can  well  afford  to  have  a  material  engineer, 
whose  province  is  not  only  to  accumulate  the  data  for,  and  draw 
up  the  specifications,  but  to  supervise  the  inspection  and  tests 
of  receipts.  Small  factories,  of  course,  seldom  can  carry  such 
a  man.  It  then  falls  to  the  lot  of  the  purchasing  agent  to  handle 
the  job. 

Now,  anybody  can  write  a  specification,  such  as  it  is.  But 
to  prepare  a  specification  that  satisfies  the  requirements  of  scien- 
tific accuracy  calls  for  special  ability.  In  the  course  of  time, 
however,  by  systematically  saving  and  indexing  every  scrap  of 
information  bearing  on  specifications  he  can  find,  including 
specimens  of  actual  specifications  and  model  specifications  such 
as  technical  societies  and  trade  associations  publish,  any  live 
purchasing  agent  can  make  himself  fairly  competent. 

As  examples  of  the  kind  of  information  to  be  collected  by  a 
buyer  who  has  to  shoulder  the  burden  of  specification  and  con- 
tract making,  excerpts  from  one  buyer's  carefully  indexed  data 
book  are  shown  in  Figure  VIII. 

These  notes  are  typewritten  and  kept  in  a  special  binder, 
readily  accessible  to  all  who  are  interested.  New  data  are  being 
constantly  added ;  old  data  changed  as  conditions  of  the  market 
and  the  business  require. 

Every  purchasing  man  who  has  held  one  position  any  length  of 
time,  naturally  accumulates  a  mass  of  such  detailed  information 
on  the  materials  he  regularly  is  called  upon  to  buy.  The  more 
important  technical  details,  which  are  difficult  to  hold  in  mind, 
some  jot  down  in  private  notebooks.  But  by  getting  it  all  down 
in  standard  form  as  described,  not  only  is  the  person  in  regular 
charge  benefited,  but  should  he  for  any  reason  temporarily  or 
permanently  be  obliged  to  give  way  to  another  who  lacks  the 
same  experience,  the  organization  does  not  suffer. 
Regardless  of  who  prepares  the  specifications,  the  manager 


SPECIFICATIONS  125 


should  take  a  vital  interest  in  their  final  form  and  attach  his 
signature  in  approval.  In  some  plants  where  the  committee  sys- 
tem of  management  is  in  vogue,  it  is  part  of  the  work  of  the 
purchase  committee  to  approve  specifications.  Mr.  D.  S.  Felt, 
president  of  the  Felt  &  Tarrant  Company,  considers  the  matter 
so  important  that  he  allows  no  specification  to  be  issued  or  to  be 
altered  in  the  slightest  degree  without  personally  passing  on  it. 

Even  specifications  can  be  standardized,  that  is,  put  on  the 
interchangeable-part  basis.  Many  paragraphs,  if  not  whole  sec- 
tions, often  are  common  to  a  number  of  specifications  and  some 
to  all.  Business  sense,  therefore,  dictates  that  matters  which 
are  common  or  can  without  sacrifice  of  substance  be  made  iden- 
tical, be  designated  accordingly.  In  making  up  a  new  specifica- 
tion, the  writer  then  can  simply  refer  by  index  number  to  stand- 
ard paragraphs  and  be  obliged  to  prepare  afresh  only  what  is 
absolutely  new  and  different.  Specification  writers  for  big  archi- 
tectural and  engineering  firms  make  this  their  regular  prac- 
tice. To  build  a  specification  from  the  ground  up  each  time  in- 
volves a  tremendous  amount  of  duplicated  and  therefore  waste 
effort,  and  in  a  plant  having  much  of  this  kind  of  work,  standard- 
ization of  the  preparation  means  a  steady  financial  saving. 

A  GOOD  SPECIFICATION  IS  BASED  ON  BOTH  SERVICE 
AND  LABORATORY  TESTS 

\\T HEN  specifications  on  steel  were  first  issued  there  was  oppo- 
sition  on  the  part  of  the  steel  mills  to  the  inclusion  of 
chemical  data  in  the  specifications.  They  claimed  that  the  con- 
sumer should  only  specify  the  physical  properties  of  the  metal, 
and  exclude  or  limit  by  chemical  data  only  the  objectionable 
constituents.  The  steel  maker  then  would  be  free  to  vary  those 
constituents  according  to  his  own  ideas.  The  most  valuable 
properties  of  steel,  however,  depend  upon  those  constituents. 
A  certain  set  of  physical  properties  produced  in  steel  by  high 
carbon  and  low  manganese  may  yield  a  steel  more  valuable 
to  the  consumer  than  approximately  the  same  physical  properties 
produced  by  lower  carbon  and  higher  manganese,  or  other  inter- 
change of  the  constituents  that  commonly  affect  the  physical 
properties  of  steel.  A  good  specification  must,  therefore,  be  the 
result  of  the  joint  effort  of  those  who  know  steel  from  its  behavior 


126 SETTING   STANDARDS 

while  it  is  being  manufactured,  and  of  those  who  know  it  from 
its  behavior  while  in  service. 

There  is  no  hard  and  fast  rule  as  to  the  weight  or  volume  of 
material  which  should  be  represented  by  one  sample.  When  the 
material  is  made  in  batches,  any  sample  taken  will  obviously 
represent  that  batch. 

"When  a  carload  of  iron  reaches  the  yards  in  a  certain  foundry, 
this  inspection  routine  follows:  Four  pigs  are  taken  from  dif- 
ferent parts  of  the  car.  These  are  broken  in  two  and  one  piece 
of  each  is  sent  to  the  laboratory.  Here  the  four  pieces  are  drilled 
and  the  shavings  are  intimately  mixed.  The  result  is  a  repre- 
sentative sample  of  the  whole  carload.  The  mixture  is  analyzed 
for  silicon,  sulphur,  phosphorus,  manganese  and  carbons.  If 
it  proves  to  be  up  to  the  specifications,  the  laboratory  0.  K.'s 
the  car  and  it  is  unloaded.  If  the  sample  is  not  up  to  grade, 
six  other  pigs  are  taken  from  the  car  and  another  analysis  is 
made  from  these.  In  the  majority  of  cases  the  second  analysis 
checks  the  first.  The  0.  K.'d  analysis  is  sent  to  the  operating 
department  and  there  becomes  the  basis  for  mixing  the  iron 
for  the  furnaces. 

In  the  case  of  paints  the  question  of  sampling  is  more  difficult. 
Such  shipments  are  made  up  of  material  resulting  from  a  num- 
ber of  like  operations,  without  any  certainty  as  to  the  uniformity 
in  the  output  of  each  complete  operation.  The  sampling  must 
necessarily  be  rather  arbitrary ;  but  if  there  should  be  any  indi- 
cation of  lack  of  uniformity  in  the  shipment,  an  amendment  of 
the  specifications  is  probably  called  for. 

How  many  individual  parts  shall  constitute  a  sample,  is  a 
question  that  often  comes  up.  In  a  shipment  of  ten  tons  of  soap, 
shall  one  pound  be  taken  for  examination  or  shall  several  pounds 
be  taken  from  different  parts  of  the  shipment?  If  fifty  barrels 
of  linseed  oil  are  received,  shall  one  barrel  be  sampled,  or  every 
barrel?  In  the  more  generous  interpretation  of  a  specification 
the  shipment  is  presumed  to  be  uniform  and  unimportant  varia- 
tions are  neglected. 

When  a  shipment  is  received,  sampled  in  the  prescribed  way, 
tested,  and  found  wanting — what  then?  The  producer  usually 
asks  for  another  test,  in  the  hope  that  this  may  show  more 
favorable  results  and  allow  the  material  to  slip  in.    If  the  second 


Actual  weather  tests  have  enabled  purchasing  agents  to  buy  such  items  as  paint  with  little  or  no 
guesswork  as  to  quality.  Above  are  shown  racks  on  a  factory  roof  where  standardized  paint  samples 
of  different  colors  are  undergoing  accurate  comparative  tests.  Samples  are  later  examined  under  a 
microscope.     The  discs  are  microscopic  photographs  showing  the  degrees  of  cracking  and  scaling 


SPECIFICATIONS  129 


test  is  favorable,  the  consumer  is  naturally  anxious  to  make  a 
third,  or  "decision  test."  Specifications  are  not  drawn  for  the 
purpose  of  making  it  easy  for  irregular  or  carelessly-made 
material  to  be  accepted.  It  is  far  better  to  make  the  limits  of 
the  specification  wide  enough,  when  it  is  first  drawn,  so  that 
they  will  cover  all  the  uncertainties  of  manufacture,  and  eliminate 
carelessness,  bad  judgment,  or  any  other  attempt  to  sell  an  in- 
ferior product  at  the  price  of  a  good  one. 

TWENTY-FOUR  STANDARD  RULES  FOR  DRAWING 
SOUND  SPECIFICATIONS 

A  NOTHER  problem  which  arises  in  connection  with  "specifi- 
cation purchases"  is  to  prevent  material  from  being  offered 
again  which  has  once  been  rejected.  Our  federal  government 
in  some  cases  marks  the  rejected  shipment  and  thus  lowers  the 
value  of  the  material.  The  manufacturer  is  compelled  to  cover 
himself  by  raising  his  prices.  Even  this  "branding"  is  impos- 
sible for  oils,  so  that  in  this  case  the  difficulty  is  partially 
obviated  by  putting  a  clause  in  the  contract  providing  that  the 
manufacturer  must  pay  the  return  freight  on  rejected  material. 
If  the  buyer  observes  that  any  vendor  habitually  returns  rejected 
goods,  he  should  simply  refuse  to  accept  future  bids  from  that 
firm. 

Many  manufacturers  object  to  specifications  on  the  ground 
that  they  are  annoying  and  really  serve  no  good  purpose ;  on  the 
other  hand,  other  producers  distinctly  request  them.  Some  con- 
sider a  difficult  specification  a  direct  advantage,  as  it  eliminates 
the  competition  of  inferior  products.  It  should  always  be  borne 
in  mind  that  low  prices  must  be  the  result  of  unusual  manufac- 
turing facilities  or,  as  is  more  frequently  the  case,  that  low  prices 
indicate  poor  quality. 

In  many  cases  the  consumer  is  afraid  to  adopt  specifications, 
thinking  that  the  price  of  the  product  will  be  raised  by  the  pro- 
ducer. Experience  has  shown,  however,  that  after  the  producers 
have  become  accustomed  to  the  new  specifications,  their  prices 
invariably  drop  to  a  greater  or  less  extent.  This  course  may  be 
due  to  three  facts:  all  bidders  are  making  prices  on  the  same 
quality  of  goods ;  the  material  which  is  defined  in  a  specification 


130 SETTING  STANDARDS 

is  what  might  be  termed  "standard  material,"  so  that  the  manu- 
facturer can  without  great  risk  fill  in  idle  time  with  its  manufac- 
ture; since  the  material  is  "standard,"  the  manufacturer  with- 
out fear  of  loss  can  purchase  the  constituents  in  a  favorable 
market. 

Cooperation  among  the  plants  in  a  given  industry,  through 
associations,  is  especially  useful  in  this  connection.  Whereas 
the  adoption  by  a  single  factory  of  a  policy  of  buying  only  on 
specifications  might  work  a  hardship  to  that  particular  factory, 
if  all  the  plants  in  the  industry  agree  to  buy  only  on  this  basis, 
the  suppliers  are  quickly  brought  into  line  and  no  one  suffers. 
It  is  also  possible  for  such  an  association  to  have  uniform  specifi- 
cations on  many  of  their  materials,  and  one  group  of  manufac- 
turers are  even  doing  their  purchasing  in  common. 

The  problems  which  arise  in  the  drawing  of  specifications  are 
covered  by  the  rules  laid  down  at  various  times  by  the  late  Dr. 
Charles  Benjamin  Dudley,  president  of  the  International  Asso- 
ciation for  Testing  Materials  and  the  American  Society  for 
Testing  Materials.  The  precautions  which  he  suggested  in  his 
personal  interviews,  and  in  his  practice,  are  the  result  of  careful 
thought  by  a  man  unusually  well-fitted  for  the  task.    They  are : 

(1)  A  specification  should  not  attempt  too  much  nor  be  too 
complicated. 

(2)  Well-known  methods  of  analysis  or  testing  should  be 
referred  to  only  in  a  general  way. 

(3)  Well-known  precautions  to  be  observed  by  the  inspector 
should  not  be  explained  in  detail. 

(4)  New  methods  of  analysis  or  testing,  not  well  known,  must 
be  described  in  detail,  or  reference  must  be  made  to  the  original 
publication. 

(5)  Analyses  like  those  of  soap  and  oils,  which  are  not  con- 
ducted in  the  same  manner  by  all  chemists,  should  be  issued  in 
separate  pages  and  made  a  part  of  the  specification. 

(6)  When  drawing  up  a  specification  do  not  incorporate  in 
it  all  you  know  about  that  particular  subject. 

(7)  Do  not  put  too  many  restrictions  into  the  specifications, 
but  state  as  few  tests  as  are  necessary  to  yield  the  product  re- 
quired. 

(8)  Do  not  make  the  limits  too  severe.     If  you  tie  the  manu- 


SPECIFICATIONS  131 


facturer  down  to  the  extreme  limit,  you  place  him  in  absolute 
antagonism. 

(9)  It  is  better  to  specify  a  good  average  material,  and  get 
the  necessary  protection  of  machines  and  processes  by  a  more 
liberal  factor  of  supervision  and  technical  knowledge,  rather 
than  to  insist  on  extreme  limits,  which  can  only  lead  to  constant 
friction  and  a  demand  for  concessions. 

(10)  Do  not  think  that  the  most  perfect  specimen  of  a  certain 
product  should  be  made  to  represent  the  total  output  of  the  works. 
The  use  of  such  extreme  figures  is  one  of  the  worst  possible 
mistakes  observed  in  some  specifications. 

(11)  All  parties  whose  interests  are  affected  by  a  specification 
should  have  a  voice  in  its  preparation. 

(12)  The  limitations  contained  in  a  specification  may  be  de- 
rived from  any  source  of  knowledge,  and  the  tests  may  be  micro- 
scopic, physical  or  chemical. 

(13)  The  specification  should  contain  all  the  information 
which  is  needed  by  those  who  are  to  enforce  it.  This  includes 
the  chemist,  the  engineer,  the  purchasing  agent  and  the  super- 
intendent. 

(14)  The  service  which  the  material  is  to  perform,  in  connec- 
tion with  reasonable  possibilities  in  its  manufacture,  should 
determine  the  limitations  of  a  specification. 

(15)  Proprietary  articles  and  products  made  by  processes 
under  the  control  of  the  manufacturer  cannot  be  made  the  subject 
of  specifications.  The  consumer,  however,  may  determine  the 
chemical  and  physical  properties  of  any  preparation  and  incor- 
porate these  in  a  specification. 

(16)  The  sample  for  testing  must  always  be  taken  at  random. 
The  amount  of  material  represented  by  one  sample  must  be 
determined  by  the  nature  of  the  material,  its  value,  its  probable 
uniformity,  and  its  importance. 

(17)  Average  samples,  made  up  of  a  number  of  samples, 
should  only  be  prepared  in  cases  where  the  limits  of  the  specifi- 
cations are  so  narrow  that  they  do  not  cover  the  ordinary 
irregularities  of  good  practice  in  manufacture. 

(18)  Retests  of  material  which  has  once  been  rejected  should 
be  allowed  only  on  very  good  grounds.  They  are  justified  when 
there  is  a  doubt  as  to  the  exactness  of  a  test. 


132 SETTING  STANDARDS 

(19)  If  it  is  desired  to  sell  rejected  material  to  a  consumer, 
after  it  has  been  rejected  by  him,  a  concession  in  price  must 
be  made. 

(20)  When  a  consumer  has  purchased  material  on  specification 
it  is  unfair  to  ask  of  the  manufacturer  guarantee  of  the  behavior 
of  the  material  in  service. 

(21)  It  should  as  a  rule  be  unnecessary  to  mark  rejected  ma- 
terial when  dealing  with  reputable  firms,  but  if  this  is  necessary, 
an  inconspicuous  private  mark  may  be  applied.  In  any  case 
the  manufacturer  should  be  obliged  to  pay  return  freight  on 
rejected  goods. 

(22)  Specifications  should  be  examined,  and  if  necessary 
revised,  six  months  after  they  have  first  been  put  into  force. 
This  makes  it  possible  to  introduce  the  knowledge  gained  by 
actual  usage. 

(23)  In  testing  materials,  if  the  results  are  just  outside  of 
the  prescribed  limits,  allowance  should  be  made  for  error. 

(24)  A  complete  workable  specification  should  harmonize  the 
naturally  antagonistic  interests  of  producer  and  consumer.  It 
should  have  the  fewest  requirements  consistent  with  securing 
satisfactory  material ;  should  leave  no  chance  for  ambiguity ;  and 
above  all,  it  should  embody  the  results  of  the  latest  studies  of 
the  properties  of  the  material. 


Part   III 


STOREKEEPING 


AUTHORITIES  AND  SOURCES 
FOR  PART  III 


Chapter  XIII.  Contributed  by  Mr.  Porter  from  his  investi- 
gations and  experience  with  storekeeping  methods  in  both  small 
and  large  factories  in  various  lines. 

Chapter  XIV.  Contributed  by  members  of  the  editorial  staff 
of  Factory,  with  J.  W.  Wiley,  assistant  secretary,  The  Meyercord 
Company,  collaborating.  The  chapter  is  based  upon  a  study 
of  indexing  methods  in  more  than  a  score  of  factories. 

Chapter  XV.  Contributed  by  Mr.  Feiker  and  Mr.  Porter. 
Reference  is  made  to  the  plants  of  the  Whitney  Manufacturing 
Company,  Kohler  Company,  Hart-Parr  Company,  Thomas  B. 
Jeffery  Company, and  Hendee  Manufacturing  Company.  Among 
the  lines  to  which  particular  reference  is  made  are  cutlery,  range 
finders,  machine  tools,  electric  locomotives,  transmission  ma- 
chinery, brushes,  and  electrical  devices. 

Chapter  XVI  presents  the  results  of  an  investigation  by 
Mr.  Porter.  Illustrations  are  given  of  the  delivery  methods  of 
Lodge  &  Shipley  Machine  Tool  Company,  Bethlehem  Steel 
Works,  Hart-Parr  Company,  Ford  Motor  Company,  General 
Electric  Company,  Whitney  Manufacturing  Company,  Willys- 
Overland  Company,  Kohler  Company,  and  others. 

Chapter  XVII.  Contributed  by  Ford  W.  Harris,  consulting 
engineer,  formerly  with  the  Westinghouse  Electric  &  Manufactur- 
ing Company,  and  Henry  M.  Wood,  Lodge  &  Shipley  Machine 
Tool  Company. 

Chapter  XVIII.  Chiefly  contributed  by  Chester  R.  Reed, 
purchasing  agent,  Reed  &  Prince  Manufacturing  Company; 
with  S.  B.Rogers,  Sangamon  Electric  Company,  collaborating. 

Chapter  XIX:  This  chapter  was  written  from  the  experience 
of  the  following:  H.  W.  Coleman,  superintendent,  Lidgerwood 
Manufacturing  Company;  A.  C.  Carlisle,  purchasing  agent, 
Stude baker  Manufacturing  Company;  L.  E.  King,  Union  Model 
Works;  Frank  W.  Birdseye,  Chalmers  Motor  Company;  Wilfred 
G.  Astle,  The  Toronto  Electric  Light  Company;  Louis  C.  West, 
and  Mr.  Porter.  In  addition  to  the  firms  already  mentioned, 
reference  is  made  to  a  Cleveland  manufacturing  plant,  Elgin 
Watch  Company,  Ford  Motor  Company,  H.  H.  Franklin  Manu- 
facturing Company,  Joseph  T.  Ryerson  and  Son,  Detroit 
Lubricator  Company,  North  way  Motors  &  Manufacturing  Com- 
pany, a  New  York  electrical  company,  and  a  machine  company. 


XIII 

CONTROLLING  STORES 
LIKE  CASH 


ALMOST  invariably  when  a  factory  manager  calls  in  an 
efficiency  expert  to  help  him  in  fixing  more  definite  routine 
methods  and  putting  in  useful  systems,  an  initial  point 
of  attack  is  the  stores.  And  it  is  by  no  means  unusual  for  so 
large  a  saving  to  be  shown  the  first  year  on  this  one  item,  as  to 
repay  several  times  over  the  expense  of  systematizing  the  entire 
plant.  Materials  are  but  cash  in  a  less  fluid  form  and  it  pays 
to  handle  them  with  similar  care.  The  fact  that  poor  control  of 
stores  is  one  of  the  largest  sources  of  loss  in  American  industry 
is  a  challenge  to  every  manager  who  faces  his  present  costs  with 
concern. 

Directly  the  principal  sources  of  loss  are  three.  First,  wasteful 
use  of  materials  and  supplies — particularly  supplies — which  al- 
ways obtains  where  workmen  have  free  access  to  stores,  since 
issuance  is  then  not  checked,  and  standards  of  consumption  are 
totally  lacking.  This  is  not  surprising,  since  it  is  a  universal 
tendency  to  be  careless  in  the  use  of  what  belongs  to  another. 
This  tendency  in  the  shop  can  only  be  curbed  by  requiring  strict 
accounting  for  all  materials  issued.  Twenty-five  per  cent  excess 
consumption  on  this  score  alone  is  not  extraordinary. 

Second,  appropriation  of  company  material  for  private 
purposes.  This  also  seems  to  be  a  natural  and  inevitable  accom- 
paniment of  lax  control,  and  in  some  cases  has  reached  such 
proportions  as  seriously  to  impair  profits.  In  the  average 
instance,  what  one  man  appropriates  in  the  course  of  a  year 
does  not  amount  to  much  and  it  is  chiefly  because  he  takes  this 
view  of  it  that,  without  particular  scruples,  he  continues  the 


136  STOREKEEPING 


practice  until  finally  he  comes  to  consider  that  he  is  only  taking 
what  is  his  right.  This  is  why,  mainly,  he  so  stubbornly  opposes 
the  inauguration  of  any  scheme  which  means  the  curtailing  of 
his  privilege. 

Out-and-out  thievery  is  the  third  direct  source  of  loss.  This 
in  the  average  industry  amounts  to  little,  but  in  certain  lines 
may  constitute  the  largest  single  item  of  loss.  It  all  depends  on 
the  character  of  the  stores.  Articles  and  materials  of  small  bulk 
but  high  value,  which  easily  may  be  concealed  about  the  person 
or  secreted  in  a  dinner  pail,  and  which  find  a  ready  market  as 
junk,  constitute  a  temptation  to  which  even  the  highest  grade 
of  workman  sometimes  succumbs.  Copper  and  brass,  in  the  form 
of  wire,  hardware  or  scrap  are  such  materials. 

While  it  is  true  that  apprehension  and  arrest  of  shop  culprits 
has  the  desired  effect  for  a  while,  in  a  few  weeks  or  months  the 
lesson  is  forgotten,  and  conditions  again  become  as  bad  as  ever. 
Proper  storekeeping  and  accounting  methods,  however,  put  a 
permanent  stop  to  the  trouble. 

Indirectly  there  are  several  other  sources  of  loss.  For  one, 
lack  of  standards  of  consumption  and  of  rigid  control  over 
issuance  almost  invariably  means  the  carrying,  in  aggregate, 
of  a  larger  stock  than  actually  is  necessary.  This  amounts  to  a 
wasteful  employment  of  working  capital,  and  in  interest  on  the 
excess  investment  and  a  heavier  depreciation  on  stores  consti- 
tutes a  direct  charge  against  profits.  In  a  typical  instance,  at 
the  end  of  the  first  year  following  the  over-hauling  of  the  store- 
keeping  methods,  it  was  found  that  in  spite  of  a  growing  business 
the  factory  had  been  able  to  get  along  with  less  stock  by  twenty 
thousand  dollars  than  previously.  This  at  five  per  cent  repre- 
sents a  saving  of  one  thousand  dollars  annually  in  interest 
charges.  In  the  average  instance  further  savings  also  result 
through  the  avoidance  of  superseded  materials.  By  controlling 
the  supply  statistically,  it  is  possible  not  only  to  keep  the 
quantity  of  all  items  on  hand  always  close  to  the  minimum,  but 
gradually  to  exhaust  any  materials  that  a  contemplated  altera- 
tion in  the  design  of  the  product  will  make  unnecessary,  so  that 
when  the  old  style  is  dropped  the  discard  is  practically  nil. 

Production  delays  on  account  of  shortages,  although  a 
less  tangible  source  of  loss,  nevertheless  are  among  the  largest 


HOW  TO  CONTROL  STORES 137 

negative  factors  in  the  problem.  To  eliminate  these  alone  is, 
in  the  average  case,  worth  all  the  time,  energy  and  money 
required  to  rectify  the  control  of  stores.  For  of  all  the  evil 
fruits  of  laxity,  shortages  are  the  most  baneful  in  their  effect 
upon  production  efficiency.  Literally  these  tie  up  the  wheels  of 
industry. 

Usually,  also,  where  laxity  obtains  in  this  department  of  an 
industry,  there  is  a  lack  of  centralization  as  well.  This  means 
the  occupancy  of  valuable  producing  space  about  the  factory 
for  storages.  As  a  result,  although  the  aim — in  abstract  laudable 
enough — is  to  keep  materials  as  handy  as  possible  to  the  point 
of  utilization,  production  is  impeded,  a  strict  accounting  is 
made  very  difficult  if  not  impracticable  and,  through  the  ineffi- 
cient piling  of  materials,  and  the  resultant  requirement  of  larger 
space  for  storages,  every  square  foot  of  producing  space  is 
burdened  with  a  higher  overhead  charge. 

Integrating  all  these  losses — if  this  were  possible — makes  their 
elimination  by  the  adaptation  of  a  proper  stores  system  a  matter 
of  prime  importance.  Systematizers  as  a  rule  make  no  mistake 
in  electing  stores  an  initial  point  of  attack. 

The  first  step  is  to  consolidate  all  the  stores  in  one  or  more 
centrally  located  storerooms  or  store  places,  to  close  off  these 
from  the  rest  of  the  factory,  and  to  place  a  keeper  in  charge 
who  is  under  instructions  to  issue  no  materials  whatever,  except 
on  receipt  of  a  duly  authorized  requisition  signed  by  a  foreman 
or  other  responsible  head. 

Materials  like  lumber,  pig  iron  and  sand,  whose  bulk  is  large 
and  relative  value  small,  of  course  do  not  require  these  same 
precautions.  Nevertheless  it  is  essential  to  establish  a  definite 
responsibility  even  for  their  keeping  and  to  allow  only  designated 
persons,  for  a  stated  purpose,  to  take  from  the  pile.  In  case 
of  the  particular  materials  mentioned,  which  usually  are  stored 
in  the  open,  the  yard  foreman  is  a  proper  official  to  name  as 
keeper  and  he  should  be  required  to  render  daily  a  report  in 
detail  of  materials  that  have  gone  into  the  works— also  of  fresh 
supplies  that  have  been  received. 

It  may  be  argued  that  only  a  large  factory  could  afford  to 
carry  out  completely  these  precautions.  To  some  extent  size 
is  a  limiting  factor.     Certainly  it  does  not  seem  a  profitable 


138  STOREKEEPING 


procedure  to  tie  down  a  good  man  to  a  storeroom  when  only 
a  small  part  of  his  time  will  be  required.  However,  there  is 
usually  a  way  out.  A  small  woodworking  plant  found  it  possible 
to  combine  the  functions  of  storekeeper  and  cost  clerk  in  one 
man  and  thus  secured  the  full  value  of  his  time. 

In  other  cases,  some  piece  of  equipment,  perhaps  a  small 
lathe  or  a  grinding  machine,  has  been  brought  into  the  storeroom 
and  the  operator  made  responsible  for  the  stores  as  well.  Still 
another  expedient  is  to  have  "office  hours"  for  the  storeroom. 
During  a  set  hour  each  morning,  and  if  necessary,  again  in  the 
afternoon,  a  foreman,  a  trusted  workman,  the  time  clerk,  or  even 
the  bookkeeper,  takes  possession  and  opens  up  the  window  for  the 
filling  of  requisitions.  The  foremen  then  arrange  to  get  materials 
only  during  these  hours  and  between  times  it  is  impossible  to 
gain  access  to  the  stores  without  going  to  the  superintendent 
himself.  A  small  cutlery  manufacturer  is  one  who  found  in 
this  device  a  satisfactory  solution  of  his  problem. 

INDEXING  AND  FILING  MATERIALS  AND  SUPPUES 
FOR  AUTOMATIC  ACCOUNTING 

A  XIOMATIC  also  is  it  that  a  suitable  system  of  filing  and 
indexing  stores  be  provided.  There  must  be  a  place  for  each 
article  or  material,  and  this  must  be  determined  principally  with 
a  view  to  greatest  facility  in  issuance.  It  is  also  essential  that 
the  space  be  utilized  as  efficiently  as  practicable,  in  order  that 
the  space  charges  for  storage  purposes  be  minimum.  As  far  as 
possible,  furthermore,  the  bins  or  racks  should  be  arranged  so 
that  the  keeper  can  tell  at  a  glance  how  his  supply  is  holding 
out.  If,  in  addition,  the  arrangement  can  be  made  to  show 
automatically  when  the  low  limit  has  been  reached  on  any  item, 
so  much  the  better.  If  not,  the  keeper  should,  in  general,  be 
required  to  operate  a  record  of  receipts  and  disbursements,  so 
that  as  a  matter  of  figures  he  knows  exactly  the  balance  on  hand. 
Tags,  suitably  columned,  which  are  attached  to  the  bin  or  frame 
of  the  rack,  have  been  found  quite  convenient  for  this  purpose. 
As  a  check  on  the  storekeeper,  office  records  also  are  operated 
which  keep  constantly  in  view  the  balance  of  each  material  on 
hand.  These  may  take  the  form  of  cards  or  of  sheets  (Form 
XXIX)  in  a  looseleaf  binder.    In  special  cases  it  may  even  be 


HOW  TO  CONTROL  STORES 


ISO 


REQUISITION  FOR  OUTSIDE  MATERIAL 


NUMBER 


PURCHASE  ORDER  NO. 

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ARTICLE  AND  DESCRIPTION 


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DEPARTMENT 


EXPENSE  ACCOUNT 


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ARTICLE  AND  DESCRIPTION 


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FORMS  XXVI-XXVIII:      To  reduce  to  a  routine  the  requisitioning  of  outside  material  and  the 

checking  of  stock-room  receipts  and  disbursements,  these  three  forms  are  useful.    The  requisitions 

furnish  the  information  by  which  the  balance  on  hand  is  diminished.     The  receiving  records  and  the 

reports  of  new  material  give  information  by  which  the  balance  is  increased 


140  STOREKEEPING 


possible  to  adapt  a  graphic  accounting  scheme  on  some  items  and 
thus  cut  down  cost  of  clerical  work. 

Whatever  the  form  or  character  of  the  recording  device,  it 
should  start  with  an  actual  physical  inventory  as  the  basis. 
Stock  requisitions  (Form  XXVII),  signed  by  the  storekeeper, 
then  furnish  the  information  by  which  the  balance  on  hand  is  di- 
minished, and  receiving  records  (Form  XXVIII),  when  checked 
with  the  storekeeper 's  reports  of  new  materials  added,  to  the  stock, 
the  information  by  which  the  balance  is  increased. 

It  is  also  well  to  operate,  on  the  same  form,  a  record  of  purchase 
orders — number  and  date  of  order,  quantity,  vendor  and  when 
delivery  is  promised.  Then,  in  event  of  an  unusual  consumption, 
the  record  (Form  XXIX)  shows  how  soon  a  fresh  supply  will 
be  available. 

Further  data  needed  on  the  inventory  form,  in  addition  to  the 
name  of  the  article,  price,  filing  symbol  and  place  of  storage, 
are  the  high  and  low  quantity  limits,  the  desirable  ordering 
quantity  and  the  daily,  weekly  or  monthly  requirement.  The 
last  should  be  very  carefully  determined  and  periodically  the 
actual  compared  with  the  theoretical  consumption.  This  in- 
formation in  the  hands  of  the  executive  is  an  effective  instru- 
ment of  control. 

The  names  of  suppliers,  their  respective  quotations,  freight 
charges  (if  not  included  in  the  price)  and  usual  interval  of 
delivery  also  are  often  noted  on  this  form,  where  they  prove 
exceedingly  convenient  for  use.  But  ordinarily  space  limitations 
forbid  their  inclusion  and  a  separate  record  is  provided  such  as 
Form  XXX. 

HOW  THE  STOCK  RECORD  CAN  BE  MADE  TO  SHOW 
WHEN  NEW  PURCHASES  ARE  NECESSARY 

IN  factories  that  make  to  customers'  orders,  the  stock  record 
is  capable  of  still  another  service.  No  regular  requirements 
can  in  this  case  be  stated  and  the  maximum  and  minimum  limits 
become,  at  best,  only  rough  guides.  By  adding  to  the  form  a 
column  for  the  entry  of  quantities  needed  for  orders  just 
received,  and  a  second  balance-on-hand  column,  the  net  balance, 
from  which  all  known  requirements  have  been  deducted,  can  be 
carried  alongside  the  actual  physical  balance,  and  thus  the  need 


HOW  TO  CONTROL  STORES 


141 


for  fresh  purchases  shown  up  at  the  earliest  possible  moment. 
Such  systematizing  is  sound  business  policy.  No  manufacturer 
would  think  of  issuing  checks  against  an  unknown  bank  balance ; 
nor  if  he  found  his  accounts  payable  at  any  time  likely  to  exceed 
his  cash  account,  would  he  delay  to  make  provision  for  an  ade- 


FORMS  XXIX  and  XXX:      The  perpetual  inventory  record  is  a  complete  history  of  the  pur- 
chase receipt  and  disbursement  of  any   item.      It  shows  constantly  the  quantity  on  hand  and 
indicates  by  the  rate  of  consumption  how  soon  another  supply  will  be  needed.    Inventory  and  price 
records  may  be  made  up  either  as  sheets  for  looseleaf  binding  or  as  cards  for  filing 

quate  supply  when  the  critical  due-date  arrived.  No  less 
should  he  be  correspondingly  provident  as  to  the  adequacy  at 
all  times  of  his  stock  supply. 

If  it  is  valuable  for  the  manufacturer  to  have  in  mind  con- 
stantly the  cash-control  idea  with  regard  to  his  stores,  it  is  no 
less  helpful  to  get  the  workmen  imbued  with  the  same  idea. 
The  very  fact  that  the  stores  are  under  lock  and  key  and  may 
be  obtained  only  by  getting  the  0.  K.  of  a  foreman,  exerts  a 
strong  influence  in  this  direction.  It  is  a  psychological  truth  that 
the  easier  a  thing  is  to  get  the  less  is  the  value  at  which  it  is 
held.  This  is  not  to  say  that  issuance  should  be  so  surrounded 
with  safeguards  and  restrictions  as  to  put  workmen  to  incon- 
venience in  securing  necessary  supplies.  On  the  contrary,  the 
getting  of  needed  materials  should  be  facilitated  as  much  as 
possible.    But  any  wasteful  use  must  be  discouraged  absolutely. 

To  accomplish  these  ends,  standards  of  consumption  are  obvi- 
ously indispensable.  The  management  cannot  know  when  restric- 
tion becomes  a  nuisance  and  a  loss  unless  they  are  fortified  with 
positive  knowledge  of  the  requirements.  Then  they  can  say  with 
force  to  the  shop:  "This  is  your  allowance— for  any  excess  we 
must  in  every  case  know  the  reasons," 


142  STOREKEEPING 


When  a  management  is  in  this  commanding  position,  the  work- 
man's sense  of  value  assumes  its  normal;  and  the  proper  degree 
of  carefulness  in  the  use  of  materials  and  supplies  follows. 
Then,  and  then  only,  does  maximum  economy  in  consumption  of 
stores  result. 

The  point  is  well  illustrated  by  the  experience  of  a  New 
England  manufacturer  in  regulating  office  use  of  pencils.  For- 
merly, a  liberal  stock  of  these  was  kept  in  the  supply  vault,  and 
anyone  who  needed  a  pencil  simply  helped  himself.  One  day 
the  purchasing  agent  began  analyzing  the  bill  for  pencils.  He 
made  a  few  calculations  as  to  the  number  used  in  a  year  by  the 
average  person.  He  compared  the  result  with  his  own  consump- 
tion. The  disparity  was  astounding.  Although  he  was  a  heavy 
user,  the  average  figure  was  more  than  quadruple  his  own.  He 
thereupon  transferred  the  stock  to  his  own  desk,  and,  for  a  few 
weeks,  personally  controlled  the  issuance,  keeping  an  accurate 
record  by  individuals  of  the  number  given  out.  That  he  was  doing 
this  he  kept  to  himself.  At  the  end  of  the  first  month  the  compari- 
sons were  illuminating.  Although  the  fact  that  the  office  people  no 
longer  could  help  themselves,  but  had  to  come  to  him — a  respon- 
sible head — in  itself  was  a  powerful  counteractive  to  excessive 
use,  some  of  the  clerks  had  required  two  and  three  times  the 
quantity  used  by  others  who  were  doing  identically  the  same 
work.  It  was  evident  that  these  either  were  inordinately  waste- 
ful or  that  they  were  appropriating  pencils  for  outside  purposes. 

So  the  next  month  the  purchasing  agent  let  it  be  evident  that 
he  was  keeping  an  individual  record.  The  effect  was  electrical, 
particularly  on  those  whose  records  had  been  bad  the  previous 
month.  Pencil  consumption  at  their  desks  sank  to  about  the  same 
level  as  elsewhere,  while  the  general  level  dropped  nearly  fifty 
per  cent. 

The  third  month  the  purchasing  agent  added  the  requirement 
that  the  stubs  of  the  no-longer-usable  pencils  in  every  instance 
be  returned  and  the  exact  equivalent  in  new  ones  only  was 
issued.    This  had  the  effect  of  still  further  reducing  the  average. 

Finally,  satisfied  that  the  minimum  level  had  been  reached,  the 
purchasing  agent  compiled  a  schedule  of  individual  requirements 
and  notified  the  office  that  at  the  beginning  of  every  month  each 
person  would  receive  so  many  pencils.    Under  no  circumstances 


HOW  TO  CONTROL  STORES 143 

would  more  be  issued  that  month  and  if  anyone  ran  out  he  must 
replenish  his  supply  by  outside  purchase. 

By  this  means  the  annual  expense  for  pencils  was  cut  from 
close  to  two  hundred  dollars  to  less  than  forty  dollars — a  saving 
of  eighty  per  cent,  certainly  worth  while  and  indicative  of  what 
can  be  accomplished  by  applying  cash  methods  to  stores. 

Still  further  economies  result,  if  whenever  the  standard  is 
exceeded  because  of  breakage  or  poor  quality,  the  cause  is  investi- 
gated and  steps  taken  to  prevent  a  recurrence.  An  inordinate 
breakage  of  files  on  the  part  of  one  workman,  as  compared  with  the 
standard  of  allowance,  and  with  the  supply  used  by  other  work- 
men doing  practically  the  same  work,  indicates  one  of  two  things ; 
either  that  this  man  is  unusually  careless  and  therefore  not  worth 
retaining,  or  that  he  is  sorely  in  need  of  instruction  as  to  the 
proper  use  of  a  file.  But  if  the  average  consumption  of  files 
shows  a  large  increase  over  the  limit  set,  an  inferior  grade  would 
be  indicated  and  the  management  can  take  immediate  steps  to 
obtain  a  better  supply. 

This  contingency,  of  course,  should  not  occur  in  a  factory 
where  purchases  are  made  according  to  specification  and  are 
tested  before  acceptance,  as  in  general  is  the  only  satisfactory 
practice.  For  standards  of  consumption,  to  be  workable,  must  go 
hand  in  hand  with  standards  of  quality.  To  accept  sub-standard 
articles  and  expect  to  translate  them  into  standard  performances, 
is  like  receiving  money  without  regard  to  its  genuineness  and 
counting  on  getting  the  full  equivalent  in  return,  even  though 
some  of  the  dollars  are  counterfeit.  So  the  cash  parallel  holds 
to  the  end. 

Right  materials  plus  right  methods  of  control  plus  standards 
of  consumption  result  in  a  product  in  which  maximum  value  has 
been  embodied. 


XIV 

HOW  TO  IDENTIFY  AND 
INDEX  STORES 


CLASSIFICATION  is  the  first  step  in  the  systematic 
arrangement  and  control  of  stores.  The  necessity  for 
insurance  against  error  in  itself  justifies  the  requisite  out- 
lay. But  the  contents  of  the  storeroom  of  the  average  factory 
are  moved  about  at  the  whim  of  the  storekeeper.  There  is  no 
regular  place  for  any  item.  Sometimes  there  is  a  bin-tag  with 
the  name  and  quantity  of  the  material,  but  more  often  no  tag 
at  all  is  used.  Disorder  and  delay  in  finding  supplies  and  mate- 
rials follow.  This  delay  is  accentuated  by  the  different  designa- 
tions of  stores.  The  "shop"  name  for  supplies  and  materials 
seldom  is  the  trade  name  by  which  the  storekeeper  is  likely  to 
know  the  goods.  Moreover,  to  write  out  the  full  name  of  an 
item  is  a  waste  of  time.  An  abbreviated  system  of  identification 
is  in  line  with  economical  management. 

A  by-product  of  classification  exists,  however,  which  often 
more  than  pays  for  the  expense  entailed.  When  you  begin  to 
classify,  you  inevitably  find  superfluous  items.  Standardization, 
with  the  economy  of  larger  purchases,  results.  A  Chicago  factory 
in  the  classification  of  stores  found  in  stock  repairs  for  five 
different  kinds  of  rolling  doors.  The  doors  represented  an  accu- 
mulation of  fifteen  years.  As  the  factory  had  grown  and  new 
departments  had  been  added,  doors  of  "any  old  type"  had  been 
hung.  The  betterment  department  now  determined  upon  the 
door  satisfactory  for  all  factory  purposes  and  today  repairs  for 
this  type  only  are  carried.  Standardization  reduced  the  total 
investment  in  door  repairs  and  at  the  same  time  allowed  the 
company  to  obtain  the  economy  of  larger  purchases  of  repairs  for 


Stores  represent  cash  and  should  be  controlled  accordingly.  In  one  small  plant  the  stockkeeper 
observes  "office  hours."  In  a  tool  and  supply  room,  a  lathe  was  installed,  and  the  stockkeeper  used 
his  spare  time  in  conditioning  tools.  Below  is  shown  an  arrangement  of  unit  bins  for  raw  stock. 
The  register  keeps  a  cash  account  of  stores.      The  circle  and  arrow  indicate  adjustable  shelf  devices 


INDEXING  AND   ARRANGEMENT 147 

one  type.  Similarly,  classification  showed  twenty-six  different 
kinds  of  cotton  waste  in  use.  Some  foremen  were  using  white 
waste,  others  colored,  and  all,  waste  of  several  grades.  The 
waste  best  suited  to  average  use  was  determined  upon,  with  a 
resultant  saving  of  fifty  per  cent  in  the  annual  outlay  for  this 
item.  So  an  ever-increasing  number  of  manufacturers  are  find- 
ing the  advantages  of  classifying  stores. 

The  requisites  for  a  good  system  of  classification  are:  (1) 
simplicity,  (2)  brevity,  (3)  definiteness,  (4)  flexibility,  and  (5) 
conformity  to  the  other  symbol  systems  which  are,  or  may  be 
installed  in  the  factory. 

How  thoroughly  you  will  classify  or  what  system  of  classifica- 
tion you  will  adopt,  depends  largely  upon  the  nature  of  your 
business,  the  probability  of  its  continued  growth  and  develop- 
ment, and  what  stage  of  progress  in  system  it  has  reached. 

Two  general  schemes  of  identification  are  in  use — the  mnemonic, 
or  aid-to-memory  system,  and  the  numerical  system.  Where  the 
diversity  of  stores  is  great  the  mnemonic  is  decidedly  preferable 
to  the  numerical  under  most  conditions.  Its  chief  advantage  lies 
in  the  rapidity  with  which  everyone  in  the  organization  who  has 
anything  to  do  with  stores  and  tools  memorizes  the  symbols,  so 
that  reference  to  lists  is  unnecessary.  The  mnemonic  system  is 
in  use  wherever  the  Taylor  system  of  scientific  management  has 
been  installed,  and  the  Taylor  group  of  engineers  are  its  chief 
exponents.  Accountants  as  a  rule  prefer  the  numerical  system. 
And  where  the  business  is  simple  and  the  variety  of  stores  small, 
it  is  not  difficult  to  memorize  the  few  number  classifications  re- 
quired. Then  the  numerical  system  is  probably  preferable. 
The  numerical  system  also  is  probably  better  suited  to  businesses 
only  partially  systematized  and  to  those  that  practically  have 
ceased  to  expand.  Moreover,  even  in  a  highly  evolved  and 
rapidly  expanding  business,  if  costs  are  summarized  by  mechan- 
ical means,  the  numerical  system  is  often  more  convenient, 
as  under  the  mnemonic  system  each  symbol  would  require  an  ac- 
counting number  in  addition. 

A  choice,  therefore,  under  any  given  set  of  conditions  involves 
a  nice  balancing  of  advantages  and  disadvantages,  and  the  most 
practical  system  may  prove  in  the  end  to  be  a  combination  of 
the  two. 


148  STOREKEEPING 


In  working  out  a  mnemonic  classification,  the  first  step  is  to 
determine  the  groups  into  which  the  various  items  logically  fall. 
Similarity  in  use  rather  than  in  kind  is  the  determining  factor. 
A  class  or  group  letter  is  first  selected.  This  usually  is  the  initial 
letter  of  the  general  classification.  The  rest  of  the  symbol  is 
then  built  up  of  other  letters  similarly  chosen,  each  of  which  nar- 
rows the  classification  a  step  further  until  the  identification  is 
absolutely  distinctive  and  the  symbol  cannot  be  confused  with 
that  of  any  other  item. 

General  stores  are  designated  "S."  Stores  for  a  variety  of 
purposes  are  marked  ' '  SV. ' '  All  materials  for  a  specific  purpose 
are  grouped  together.  Materials  for  drill  presses,  for  example, 
are  so  grouped  and  designated  "SD."  The  second  letter  in  the 
symbol  indicates  the  purpose  for  which  the  material  is  to  be  used 
and  usually  is  the  initial  letter  of  the  word  which  expresses  this 
fact.  Subsequent  letters  in  the  symbols,  whether  for  stores  for 
specific  purposes  or  for  a  variety  of  purposes,  are  arranged  gen- 
erally on  the  same  basis.  The  third  letter  signifies  the  nature  of 
the  material,  as  "B"  for  bars  in  the  symbol  "SVB"  (bars  used 
for  a  variety  of  purposes),  the  fourth  letter  its  general  divisions, 
as  "B"  for  brass  and  "C"  for  copper  in  the  symbols  "SVBB" 
(brass  bars  used  for  a  variety  of  purposes),  and  "SVBC"  (cop- 
per bars  used  for  a  variety  of  purposes) ,  the  fifth  letter  the  kind 
of  article  in  the  last  subdivision,  as  "H"  for  hexagonal  and  "N" 
for  octagonal  in  the  symbols  "SVBBH"  (hexagonal  brass  bars 
used  for  a  variety  of  purposes),  and  "SVBBN"  (octagonal 
brass  bars  used  for  a  variety  of  purposes) ,  and  the  sixth,  if  neces- 
sary, the  manufacturer  or  make  as  (<S"  for  the  Simpson  Com- 
pany in  the  symbol  "SVBBHS"  (hexagonal  brass  bars  used  for 
a  variety  of  purposes  and  manufactured  by  the  Simpson  Com- 
pany). 

In  the  above  examples  it  will  be  noticed  that  "octagonal"  is 
indicated  by  "N"  in  the  symbol  designating  "Octagonal  Brass 
Bars."  This  introduces  some  of  the  complications  which  arise 
in  the  mnemonic  system.  The  letters  "0"  and  "I"  are  never 
used  in  symbols  and  "J,"  "Q"  and  "U"  rarely  because  of  the 
great  probability  of  the  confusion  of  "I,"  "0"  and  "Q"  with 
the  numerals  "1"  and  "0"  and  "J"  and  "U"  with  each  other 
or  "V."     Again  it  often  happens  that  the  initial  letter  has 


INDEXING  AND  ARRANGEMENT  149 


already  been  used  for  the  division  in  question.  In  this  case  a 
secondary  letter  for  the  most  prominent  sound  is  used,  as  "N" 
for  English  in  the  symbol  "SVPBN"  for  "English-Finished 
Book  Papers  used  for  a  variety  of  purposes. ' '  If  this  letter  also 
has  been  used,  letters  of  the  next  most  prominent  sound  are 
chosen.  If  all  of  these  in  turn  have  been  used,  arbitrary  letters 
may  be  selected,  but  to  be  as  mnemonic  as  possible,  the  next  letter 
in  the  alphabet  before  or  after  the  initial  or  the  most  prominent 
letter,  if  it  is  not  already  in  use  or  likely  to  be  used,  is  preferred. 
The  letter  "N"'for  "Octagonal"  illustrates  this  point,  as  "N" 
was  selected  because  it  precedes  "  0. "  A  purely  arbitrary  letter 
has  to  be  used  but  rarely.  Sometimes,  however,  letters  which 
ordinarily  would  not  be  used  at  all  in  the  classification  are  for 
that  reason  selected  to  indicate  certain  articles  or  classes  of 
articles,  as  "Z"  for  "miscellaneous."  Generally,  those  supplies 
and  materials  which  move  slowly  or  are  bought  in  small  quanti- 
ties are  grouped  under  "miscellaneous." 

HOW  TO  NOTE  DIMENSIONS  ACCURATELY 
IN  MARKING  STORES 

T^IMENSIONS  sometimes  are  stated  after  the  entire  symbol. 
The  general  practice,  however,  is  to  state  the  dimensions 
immediately  after  the  first  or  second  letters  for  the  general 
designation  of  stores.  Again,  the  manufacturer  may  be  indi- 
cated by  a  subnumeral  instead  of  a  letter  as  stated  above.  Thus 
"SV  11  12  150  PBXN"  would  mean  "English-Finished  Book 
Paper  Made  by  the  Ridgview  Paper  Company,  Size  11x12, 
Weight  150  Pounds  to  the  Ream  and  Used  for  a  Variety  of  Pur- 
poses." Whenever  numerals  are  used  in  subdivisions,  these,  of 
course,  must  be  memorized.  For  this  reason  letters  should  be 
used  wherever  practicable.  The  point  to  remember  in  stating  the 
dimensions  is  this :  Be  uniform.  Give  length,  breadth,  thickness, 
weight  and  similar  data  in  a  definite  order  for  all  items. 

Lack  of  thoroughness  in  working  out  the  groups  is  the  chief 
danger  of  the  mnemonic  system.  Great  care  must  be  exercised, 
as  wrong  groupings  are  worse  than  no  groups  at  all.  While  the 
mnemonic  system  is  the  more  complex  at  first,  it  is  often  better 
in  the  end,  as  under  the  numerical  system  an  increasing  amount 
of  clerical  labor  is  a  certainty  with  the  growth  of  the  business. 


150  STOREKEEFING 


The  numerical  system,  however,  is  simple  at  the  first  and  for 
this  reason  is  in  more  general  use  than  the  mnemonic. 

The  system  based  upon  numbers  may  be  one  of  several  forms, 
as  arbitrary  numbers,  an  arbitrary  combination  of  numbers  and 
letters,  or  a  combination  of  arbitrary  and  mnemonic  characters. 
For  example,  all  material  for  molding  machines  may  be  desig- 
nated "3,"  materials  for  particular  types,  as  automatic  stripping 
plate  machines  "3/1,"  core  ramming  machines  "3/2,"  and  so 
on.  Sometimes  numbers  are  given  the  mnemonic  quality  by 
grouping.  In  one  plant  numbers  900-950  denote  eye  bolts.  A 
somewhat  different  plan  is  followed  by  an  electric  company. 
Screws,  for  instance,  are  indicated  by  "17,"  170-179,  1700-1790, 
and  so  on.  The  first  two  digits  indicate  the  class  (screws),  the 
third  and  fourth  digits  and  so  on,  as  far  as  it  is  necessary  to 
carry  out  the  system,  signify  the  particular  screw  as  to  composi- 
tion and  other  details. 

Modified  Dewey  decimal  systems  also  have  been  applied  in  a 
number  of  plants.  Although  this  system  was  originated  princi- 
pally for  library  purposes,  factory  managers  and  engineers  have 
found  it  useful  for  indexing  technical  data  and  information, 
catalogs,  reports,  card  systems,  drawings  and  other  records. 
And  there  is  no  reason  why  stores  cannot  be  indexed  along  the 
same  line.  The  Dewey  classification  need  not  be  literally  fol- 
lowed, but  a  decimal  system  based  on  the  same  principle  often 
will  nicely  fit  particular  conditions.  In  the  Dewey  system  the 
first  digit  of  the  whole  number  indicates  the  primary  classifica- 
tion ;  the  second,  the  division  of  the  primary ;  and  the  third,  the 
section  of  the  division.  This  part  of  the  symbol  is  confined  to 
these  three  digits.  To  the  right  of  the  decimal  point  successive 
numbers  are  added  to  represent  finer  subdivisions  of  the  section. 
Thus,  the  symbol  625.23  stands  for  "passenger  cars."  Taking 
the  digits  in  order,  the  first  fixes  the  general  classification,  ' '  Use- 
ful Arts;"  the  second,  the  division,  "Engineering;"  and  the 
third,  the  section,  "Railroad  Engineering;"  while  the  first  digit 
after  the  decimal  point  indicates  ' '  Rolling  Stock ' '  and  the  second, 
the  kind  of  rolling  stock,  in  this  case  "passenger  cars."  Sim- 
ilarly 625.24  identifies  freight  cars.  When  more  than  three 
numbers  are  necessary  to  the  right  of  the  decimal  point,  a  second 
decimal  point  is  inserted,  and  if  more  than  six  a  third,  and  so  on. 


INDEXING  AND  ARRANGEMENT 151 

Applying  the  same  idea  to  stores,  (1)  might  represent  General 
Stores,  (2)  stores  for  a  variety  of  purposes,  and  (3)  stores  for  a 
specific  purpose,  as  drill-press  material.  Then  (12)  would  be 
interpreted  as  "stores  for  a  variety  of  purposes,"  and  (13)  as 
"stores  for  drill  presses."  The  third  digit  would  represent  the 
general  character  of  the  material,  as  sheets  or  bars.  Numbers  to 
the  right  of  the  decimal  would  amplify  the  description  still  fur- 
ther and  even  the  size  might  be  indicated  by  a  numeral.  Thus 
124.631.2  might  be  the  symbol  for  1"  hexagonal  brass  bars,  used 
for  a  variety  of  purposes  and  manufactured  by  the  Simpson 
Company.  The  value  of  such  a  system  evidently  is  its  brevity. 
Also  it  is  to  some  degree  mnemonic,  as  the  order  of  the  digits 
determines  what  each  signifies.  The  disadvantage,  as  compared 
to  the  mnemonic,  is,  of  course,  the  difficulty  of  remembering  the 
numbers,  the  necessity  for  constant  reference  to  cross-index  rec- 
ords, and  the  liability  of  errors  in  either  the  numbers  or  the  order 
in  which  they  are  written. 

That  the  numbers  often  are  not  definite  and  are  not  sugges- 
tive of  the  article  is  the  great  disadvantage  of  any  numerical 
system.  Numerical  grouping,  however,  may  be  given  a  slight 
mnemonic  quality.  In  laying  out  a  numerical  system,  you 
should  group  the  supplies  and  materials  logically  and  put  forth 
every  effort  to  make  the  classification  mnemonic  in  a  measure. 
Furthermore,  it  should  conform  as  much  as  possible  with  the 
other  symbol  systems  in  the  plant. 

ARRANGING  YOUR  STOREROOM  TO  FIT 
THE  CLASSIFICATION  CHOSEN 


I 


F  the  classification  has  been  properly  mapped  out,  the  physical 
arrangement  of  the  storeroom  is  not  a  very  difficult  task. 
Under  the  mnemonic  system  the  supplies  and  materials  are 
located  alphabetically  according  to  the  respective  symbols ;  under 
the  numerical,  they  are  placed  generally  in  numerical  succession. 
These  numbers  and  mnemonic  symbols,  it  will  be  recalled,  are 
assigned  on  the  basis  of  logical  groupings,  made  with  the  nature 
and  use  of  the  material  in  mind.  For  example,  it  would  not  be 
expedient  to  group  brass  bars  and  brass  castings  together  and 
give  them  the  same  class  symbol,  because  they  are  both  of  the 
same  metal.    The  logical  classification  would  put  the  brass  and 


152  STOREKEEPING 


steel  bars  in  the  same  group  and  likewise  brass  and  steel  castings. 
Otherwise,  in  the  physical  arrangement  of  the  room  alpha- 
betically or  in  numerical  succession,  duplication  of  special  racks 
and  bins  would  be  necessitated.  The  numerical  system,  however, 
does  not  necessarily  call  for  the  arrangement  of  stores  in  numeri- 
cal succession.  In  the  absence  of  this  method,  one  is  dependent 
to  a  larger  degree  upon  the  index.  The  mnemonic  system,  it 
will  be  observed,  is  self-indexing,  as  materials  and  supplies  are 
stored  in  alphabetical  order.  Their  location  may  be  shown  by 
symbolic  indexes  posted  at  the  end  of  the  tiers.  The  store- 
keeper, for  example,  receives  a  requisition  for  an  article  the 
symbol  of  which  appears  as  "SV8  10PL."  He  himself  may  not 
know  what  the  item  is.  He  passes  by  many  of  the  tiers  until  he 
comes  to  the  "SV"  tier.  Here  he  find  the  "P"  bin  and  the 
"L"  sub-compartment  in  which  there  are  several  little  bins  for 
different  sizes.  In  one  of  these — 8x10 — he  finds  the  item  requisi- 
tioned— lining  paper,  8x10  inches  in  size. 

If  you  follow  the  numerical  classification,  the  practice  is  to 
make  both  a  numerical  index  and  an  alphabetical  cross-index. 
The  numerical  index  indicates  the  numbers  and  names  of  all  the 
supplies  and  materials  so  designated,  together  with  bin  and  aisle 
numbers.  The  alphabetical  cross-index  consists  of  individual 
cards  with  the  names  of  all  the  stores  and  the  corresponding 
numbers.  The  storekeeper  can  thus  readily  ascertain  the  exact 
location  of  any  supplies  or  materials  requisitioned,  whether  the 
order  is  by  number  or  name.  It  sometimes  happens  that  there  are 
stores  of  little  importance  or  kept  under  peculiar  conditions  so 
that  their  inclusion  in  an  extensive  classification  is  not  desirable. 
In  this  case  a  simple  index  of  these  stores  is  sufficient. 

No  one  fixed  rule  governs  the  actual  storing  of  supplies.  Gen- 
erally speaking,  storage  with  reference  to  use  as  under  the 
mnemonic  system,  when  stores  are  divided  and  subdivided  into 
groups  is  the  best  practice.  But  it  may  be  necessary  to  make  an 
exception  to  this  rule  and  place  that  material  which  moves  fre- 
quently nearest  the  door  if  the  alphabetical  or  numerical  location 
prevents  the  arrangement  of  stores  so  that  they  may  be  delivered 
without  delay  and  with  the  least  effort.  "Whatever  system  of 
classification  you  adopt,  rapidity  of  movement,  size  and  shape 
and  quality  will  be  carefully  considered,  as  the  acid  test  of  any 


INDEXING   AND   ARRANGEMENT 153 

classification  is  the  indexing  and  arrangement  of  all  stores  so 
that  they  may  be  given  out  in  the  minimum  possible  time. 

For  the  classification  of  semi-finished  and  finished  materials 
which  may  be  in  the  stock-room  the  same  principles  of  identi- 
fication of  stores  also  hold.  Both  the  mnemonic  and  numerical 
systems  have  been  satisfactorily  applied  for  these  materials. 

That  the  use  of  mechanical  sorting,  tabulating  and  totalling 
devices  in  the  accounting  department  makes  necessary  a  numer- 
ical designation  in  addition  to  the  mnemonic  symbols,  if  these 
are  employed,  has  been  pointed  out.  This  makes  a  complication 
which  offhand  seems  to  point  the  advantages  of  adopting  a 
straight  numerical  system.  However,  there  is  something  to  say 
in  favor  of  the  double  system  of  designating.  In  the  first  place, 
it  combines  the  advantages  of  both.  The  shop  needs  to  know 
only  the  mnemonic  symbols.  When  the  records  reach  the  office, 
any  clerk  with  a  suitable  cross-index  table  can  in  a  few  moments 
each  day  enter  the  corresponding  numerical  symbols  on  such 
records  as  require  them.  It  is  an  advantage  also  to  have  both 
mnemonic  symbols  and  numerals  on  records  that  are  filed. 
Then  the  mnemonic  symbols  can  be  used  for  finding  and  the 
numerical  for  filing  and  thus  each  employed  where  it  serves  the 
greater  convenience. 


XV 

WHERE  TO  LOCATE 
THE  STOREROOM 


TAKE  a  map  of  the  United  States  and  look  at  the  steel  city, 
Gary,  Indiana.  Why  was  this  town  located  in  the  sand 
dunes  south  of  Chicago?  Primarily,  a  study  of  location 
strategy  has  indicated,  because  it  is  the  economic  center  of 
ore  and  steel  products  of  the  United  States.  It  is  placed  at  the 
spot  which  is  the  shortest  distance  from  the  ore  and  coal  mines 
on  the  one  hand  and  the  markets  on  the  other. 

Every  factory  manager  has  an  opportunity  to  work  out  this 
economic  problem  in  his  own  factory,  no  matter  how  small.  In 
every  plant  there  is  a  best  location  for  materials  and  finished 
product.  And  this  location  can  be  determined  only  by  studying 
the  conditions  of  manufacture  from  the  standpoint  of  handling 
materials:  first,  economical  receipt  of  goods;  second,  economical 
delivery ;  and  third,  economical  storage. 

Too  often  the  storeroom  in  the  manufacturing  plant  is  given 
its  location  because,  at  the  time  room  to  store  material  was  needed, 
this  location  happened  to  be  vacant.  Without  giving  the  matter 
any  greater  consideration  the  new  storeroom  was  located  in  the 
empty  space.  And  again,  when  a  plant  grows,  the  storeroom 
which  once  was  located  at  the  most  efficient  point  may,  on  ac- 
count of  the  increase  in  size  of  the  factory,  be  not  only  incon- 
venient but  absolutely  wasteful  in  its  old  location.  Above  all, 
in  laying  out  a  storeroom,  future  growth  should  be  considered. 

An  interesting  case  of  the  badly  located  storeroom  in  an  over- 
grown plant  was  found  in  a  cutlery  shop.  Supplies  and  stock 
which  were  used  in  the  emery,  buffing  and  polishing  depart- 


LOCATING  THE   STOREROOM 155 

ments,  particularly  beeswax,  glue  and  belting,  were  stored 
in  a  room  almost  as  far  away  from  the  place  where  they  were 
needed  as  it  was  possible  to  put  them.  When  a  belt  broke  on 
the  high-speed  polishing  wheel  the  polisher  took  the  old  belt  to 
the  stock-room,  got  a  new  piece,  went  into  the  carpenter  shop, 
had  it  patched,  then  returned  to  his  department. 

At  the  least  estimate  the  operator  on  the  wheel  was  absent 
twenty  minutes.  Generally  his  machine  was  idle  for  a  half  hour. 
Even  if  the  main  storeroom  in  this  instance  could  not  be  con- 
veniently moved  it  would  have  saved  a  great  deal  of  time  if  a 
second  smaller  storeroom  had  been  opened  near  the  polishing 
departments  where  supplies  intended  for  those  departments  could 
be  dispensed. 

For  the  uneconomical  storeroom  location,  the  manufacturer  of 
an  old  mill  may  have  a  good  excuse,  but  sometimes  a  man  building 
a  new  factory  fails  to  consider  what  is  the  strategic  position  for 
raw  material  and  finished  goods.  A  Glasgow  manufacturer  who 
builds  range  finders  for  the  king's  navy  did  consider  this  prob- 
lem of  location  and  solved  it  very  neatly  by  placing  the  stock- 
room midway  between  the  machine  shop  and  the  assembly  room. 

The  assembly  and  machine  rooms  are  one-story  structures 
roofed  ' '  ridge  and  furrow. ' '  Between  the  machine  and  assembly 
shops,  running  the  length  of  the  factory  structure,  is  the  store- 
room with  a  wide  passage  which  really  divides  the  one  big  saw- 
toothed  roof  area  into  two  distinct  shops  except  for  the  wide 
passageway  in  its  length. 

The  storeroom  and  tool-room  windows  open  into  this  passage- 
way between  the  machine  and  erecting  rooms  so  that  the  workman 
can  obtain  tools  and  supplies  conveniently  from  either  side  of 
the  shop.  The  storeroom  is  two  stories  high.  In  the  rooms  above 
are  the  testing  and  special  small  machine  work.  The  goods  are 
shipped  from  the  assembly  room  at  the  point  nearest  the  corner 
of  the  storeroom,  and  in  this  corner  the  finished  goods  are  stored. 

The  Hendee  Manufacturing  Company  furnishes  another  ex- 
ample of  the  well  located  storeroom.  The  storeroom  is  on  the 
railroad  side  of  the  plant  and  runs  parallel  to  the  passageway 
which  connects  the  several  departments.  Doors  leading  from 
the  storeroom  to  each  department  facilitate  deliveries.  Openings 
through  the  wall  separating  the  storeroom  from  the  shop  make 


156  STOREKEEPING 


it  possible  for  stock  to  be  taken  directly  from  the  racks  and 
fed  into  cut-off  lathes. 

Where  the  needs  of  the  workmen  are  anticipated  and  deliveries 
are  made  on  the  order  of  the  planning  department,  convenient 
receiving  may  be  the  prime  factor  in  determining  the  location  of 
the  storeroom.  The  raw  material  and  rough  parts  storage  of 
the  Hart-Parr  Company,  for  instance,  is  handled  in  a  two-story 
concrete  and  steel  building,  open  to  the  roof  at  one  end  to  permit 
the  passage  of  full-sized  freight  cars. 

Materials  may  be  handled  directly  to  or  from  any  part  of  the 
floors  and  the  siding  by  bridge  cranes  which  travel  the  length 
of  each  floor.  The  track  also  connects  with  lines  running  to  the 
gray  iron  and  steel  foundries.  The  surplus  production  of  these 
is  delivered  on  industrial  flat  cars  to  the  storehouse,  which  thus 
serves  as  the  receptacle  for  both  inside  and  outside  materials  and 
supplies. 

A  general  storekeeper  is  in  charge,  with  one  or  two  assistants, 
and  stock  is  issued  only  on  requisition  of  the  planning  depart- 
ment and  is  delivered  either  by  flat  car  or  truck  directly  to  the 
machine  in  the  erection  department,  where  it  will  be  needed. 

"While  receipt  and  delivery  are  generally  the  basic  elements  in 
the  storeroom  location  problem,  this  is  not  always  so.  Some- 
times supplies  and  material  are  of  such  nature  or  value  that 
special  storerooms  must  be  provided.  Economical  or  safe  stor- 
age then  becomes  of  the  utmost  importance.  The  Jeffrey  plant, 
for  example,  maintains  a  storeroom  with  a  fixed  temperature  for 
the  storage  of  automobile  tires  (Page  55).  Because  of  the  value 
of  stores  it  also  may  be  expedient  to  locate  the  storeroom  above 
the  first  floor  or  in  other  places  less  accessible  to  burglars.  Light, 
ventilation  and  fire  protection  are  general  requirements  for  every 
well  located  storeroom. 

Economical  storage  also  calls  for  a  fixed  minimum  of  invest- 
ment. In  those  industries  which  are  seriously  affected  by  the 
seasonal  demand  for  their  product,  this  may  be  a  particularly 
vexing  problem,  as  facilities  must  be  provided  for  an  abnormally 
large  storage  for  only  a  few  months  in  the  year.  One  way  out 
of  this  difficulty  has  been  found  by  a  manufacturer  of  enameled 
ironware.  Adjoining  the  factory  he  has  erected  tents  over  good 
substantial  flooring  laid  on  stout  "horses"  of  sufficient  height  to 


, LOCATING  THE  STOREROOM 157 

bring  the  floor  up  to  the  shipping  level.  When  the  excess  storage 
is  no  longer  needed  the  tent  and  floors  are  removed  and  placed 
in  a  convenient  corner  in  the  basement  of  the  packing  and  ship- 
ping department. 

RE-LOCATING  THE  OLD  STOREROOM 
TO  SERVE  NEW  NEEDS 

TT  is  not  necessary  to  build  a  new  plant  in  order  to  find  an 
economical  location  for  the  storeroom.  By  analyzing  the 
transportation  facilities,  the  weights  and  sizes  to  be  handled, 
and  the  possible  shift  of  departments  with  due  respect  to  the 
building  construction,  an  old  storeroom  can  often  be  located 
much  more  efficiently. 

A  manufacturer  who  builds  electric  locomotives  had  two  store- 
rooms, one  for  rough  stock,  the  other  for  finished  goods.  The 
rough  stock  warehouse  was  without  a  storekeeper.  And  the 
manager  of  the  plant  found  on  analyzing  the  layout  that  the 
stock  had  to  be  hauled  on  an  average  of  two  thousand  feet  and 
had  to  be  handled  about  ten  times.  By  re-arranging  the  inspec- 
tion system  and  putting  a  storekeeper  in  the  rough  stock  ware- 
house, the  number  of  stock  handlings  was  cut  in  two  and  the 
distance  it  had  to  be  moved  was  reduced  to  five  hundred  feet. 

If  the  product  is  of  considerable  weight  the  methods  of 
handling  it  from  the  receiving  point  ought  to  be  considered  in 
locating  the  storeroom.  Often,  if  the  parts  are  light,  it  is  quite 
possible,  by  a  proper  transportation  system,  to  locate  the  store- 
room cheaply  with  respect  to  building  construction  and  at  the 
same  time  reduce  the  amount  of  handling  and  the  time  spent  in 
transferring  goods. 

The  total  of  material  handled  in  these  departments  and  the 
ratio  it  bears  to  the  total  amount  handled  in  the  factory  will  often 
help  determine  the  best  location  of  the  raw  material  storeroom 
and  the  warehouse.  The  central  location  of  the  warehouse  in  a 
factory  making  transmission  machinery  was  determined  by  that 
plan.  Instead  of  guessing  at  the  location  and  putting  a  big  ware- 
house on  a  railroad  siding,  percentage  weights  of  material  were 
figured  and  the  warehouse  was  located  where  the  average  cost  of 
handling  by  departments  was  least.    It  may  often  be  cheaper  to 


158  STOREKEEPING 


shift  a  freight  car  on  a  spur  track  than  to  truck  material  up  and 
down  aisles  in  a  factory  in  order  to  reach  the  stock-room. 

SUBDIVIDING  THE  STOEEEOOM  AND 
PUTTING  IT  ON  WHEELS 

A  NOTHER  way  out  of  the  difficulty  of  a  storeroom  badly 
placed  with  respect  to  the  majority  of  the  departments  is 
to  subdivide  it.  This  can  be  done  to  advantage  in  the  assembly 
room  where  many  small  parts,  such  as  bolts,  screws  and  flanges 
are  fitted  with  larger  pieces.  In  two  or  three  plants  this  plan 
has  been  adopted  successfully.  Small  parts  are  charged  out  of 
the  main  storeroom  in  sufficient  quantities  to  fill  bins  in  the 
assembly  room  and  before  these  are  empty  the  head  of  the 
assembly  department  requisitions  new  supplies  from  the  main 
storeroom.  In  this  way  the  advantage  of  having  small  parts 
where  you  can  help  yourself  to  them  without  red  tape  is  com- 
bined with  the  advantage  of  having  a  check  upon  the  quantity 
of  such  parts  used. 

Much  space  can  be  saved  in  the  location  of  these  sub-store- 
rooms if  some  thought  is  given  to  the  conditions  of  manufacture. 
In  a  brush  shop,  for  example,  many  small  individual  boxes  in 
which  the  brush  is  packed  before  it  is  sterilized,  are  stored  on 
swinging  shelves  supported  from  the  ceiling  of  the  packing  room. 
This  not  only  utilizes  space  wasted,  but  prevents  the  disorder 
that  usually  attends  individual  boxing. 

Portable  sub-storerooms  will  also  help  out.  An  ordinary  truck 
fitted  with  compartments  and  with  hooks  or  pegs  for  holding 
different  sized  and  different  shaped  pieces  can  be  wheeled  to 
the  assembly  room.  For  smaller  work,  parts  stored  in  trays  or  in 
shallow  compartments  within  boxes  have  been  found  to  work 
well.  Instead  of  distributing  the  small  parts  in  bulk  a  definite 
number  of  trays  are  given  out  from  the  main  storeroom. 

In  factories  where  heavier  materials  must  be  handled  an  over- 
head carrier  system  can  often  be  installed  which  will  double  the 
efficiency  of  a  poorly  located  storeroom.  Between  the  pattern 
storage  and  the  foundry  in  one  plant  the  overhead  trolley  carrier 
not  only  reduces  the  time  required  *o  handle  the  patterns  from 
storage  to  foundry  but  reduces  the  breakage.  In  a  big  electrical 
concern  a  new  warehouse  had  to  be  erected  in  the  only  available 


LOCATING  THE   STOREROOM 159 

vacant  spot,  and  this  plan  of  bringing  departments  nearer  the 
storeroom  by  overhead  carriers  instead  of  locating  the  storeroom 
central  to  all  the  departments  was  very  thoroughly  worked  out. 
An  overhead  monorail  system  was  installed  with  switch  tracks 
leading  to  the  different  departments,  so  that  both  raw  materials 
and  finished  product  could  quickly  be  distributed  throughout  the 
plant. 

In  building  a  new  plant  or  effecting  changes  in  the  old  plant 
so  that  the  storeroom  will  be  well  located  to  serve  the  factory's 
needs,  economical  receipt  of  goods,  economical  delivery  and  eco- 
nomical storage  then  are  the  chief  factors  which  will  be  con- 
sidered in  solving  the  storeroom  location  problem.  A  correct 
solution  means  lower  costs  for  storekeeping,  fewer  production  de- 
lays and  greater  profits. 


XVI 

DELIVERY  METHODS  THAT 
EXPEDITE  WORK 


SKILLED  mechanics  are  expensive  errand  boys,  yet  highly 
paid  workmen  in  many  shops  are  expected  to  go  after  tools 
and  supplies.  Idle  machines  and  production  delays  which 
they  leave  behind  them  prove  an  additional  source  of  loss.  And 
after  all,  to  correct  these  evils,  managers  have  frequently  found 
that  plain  ingenuity  rather  than  an  addition  to  the  payroll  is 
the  essential. 

Toward  the  end  of  every  afternoon,  in  a  New  England  wood- 
working establishment,  the  storekeeper  makes  a  round  of  the 
factory.  He  interviews  every  foreman  and  ascertains  his  special 
requirements  for  the  next  day.  Returning  to  the  storeroom,  he 
fills  the  several  requisitions  and  places  the  materials  on  a  truck 
in  the  order  of  delivery.  Early  the  next  morning  he  repeats  his 
round  with  the  truck.  Thus  the  foremen  are  saved  sending  to 
the  storeroom  except  for  unforeseen  needs  that  may  arise  during 
the  day.  An  effort  is  made  to  minimize  these  by  keeping  a  com- 
parative record  of  supplies  so  issued,  and  the  head  whose  showing 
is  poorest  in  this  respect  is  due  for  a  special  interview  with  the 
superintendent.  By  this  means  carelessness  in  indicating  the 
next  day's  requirements  is  largely  obviated. 

Routine  needs  of  departments  are  met  by  setting  standards  of 
consumption.  It  is  the  storekeeper's  duty  to  see  that  these 
deliveries  are  made  regularly  and  in  proper  amount  without  the 
intervention  of  special  requisitions.  Foremen  in  turn  see  that 
their  workmen  are  supplied,  with  the  least  possible  interruption 
to  production.  As  the  men  are  on  piecework,  they  can  be  de- 
pended upon  to  check  any  tendency  of  a  foreman  to  be  dilatory. 


DELIVERY   METHODS 161 

This  plan  has  suggestions  for  every  manufacturer  who  would 
improve  his  system  of  getting  materials  and  supplies  to  the 
workmen.  The  end  to  be  achieved  is  perfect  anticipation  of  each 
producer's  wants.  So  far  as  practicable  everything  that  he 
requires  should  be  at  his  elbow  when  he  needs  it.  Then  a  mini- 
mum of  his  time  will  be  wasted  in  supplying  himself  and  a  maxi- 
mum will  be  available  for  actual  production.  This  indicates  the 
principle  to  be  followed  in  devising  delivery  methods  to  suit  the 
special  requirements  of  a  particular  factory. 

When  manufacture  is  to  stock  the  problem  is  simplest.  Then 
the  needs  of  every  workman  can  be  standardized  and  the  matter 
of  keeping  him  continuously  supplied  be  reduced  to  a  routine. 

Complexity  is  at  a  maximum  when  manufacturing  is  entirely 
to  customer's  order.  In  this  case,  only  by  carefully  planning 
out  each  job  in  advance  can  deliveries  be  timed  so  as  to  avoid 
delay  and  inconvenience  with  their  all-too-frequent  accompani- 
ments— as  increased  operating  expenses  and  broken  promises. 

Both  phases  of  the  problem  present  themselves  to  almost  every 
manager.  There  are  routine  needs  to  be  supplied,  and  special 
orders  that  require  separate  and  detailed  consideration.  Even 
in  the  factory  that  attempts  to  restrict  itself  to  stock  production, 
there  are  always  some  special  jobs,  and  the  work  of  the  main- 
tenance-and-betterment  department  is  entirely  of  this  order. 
Therefore,  flexibility  in  the  delivery  system  is  highly  important. 
It  should  lend  itself  easily  and  quickly  to  special  requirements. 

Again,  the  method  should  suit  the  case  in  point  of  expense 
involved.  Obviously  a  large  factory  can  afford  a  much  more 
elaborate  service  in  this  respect  than  a  small  one.  But  in  any 
event,  whatever  the  size  of  a  plant,  if  it  is  large  enough  to 
justify  a  centralized  storekeeping  system,  it  is  large  enough  to 
warrant  a  delivery  plan  that  satisfies  practically  the  criterion 
stated :  namely,  conservation  of  the  producer's  time  by  systematic 
anticipation  of  his  needs. 

Every  foreman  in  one  establishment  is  connected  by  telephone 
with  the  storeroom  and  telephones  in  his  requirements.  A  boy 
attached  to  the  storeroom  then  makes  the  delivery,  taking  with 
him  a  stock  requisition  in  duplicate.  The  foreman,  on  receipt  of 
the  material,  signs  the  original  of  this  and  retains  the  duplicate 
for  his  own  records.    For  the  information  of  the  storekeeper  in 


162  STOREKEEPING 


holding  the  boy  to  promptness,  he  also  indicates  the  time  of 
receipt. 

Where  it  is  not  feasible  to  operate  a  delivery  service,  or  for 
the  department  heads  to  be  connected  with  the  storeroom,  an 
arrangement  by  which  the  foreman  sends  a  department  clerk 
or  general  utility  man  for  his  supplies  in  many  cases  serves 
every  purpose.  This  works  out  well  if  the  foremen  are  trained 
to  exercise  the  proper  foresight  in  making  up  their  requisitions. 
Spasmodic  sending  to  the  storeroom  should  be  strictly  dis- 
couraged. The  plan  of  keeping  short  supply-service  hours  and 
forcing  requisitions  out  of  hours  to  go  through  an  onerous  routine 
makes  for  foresight. 

Again,  by  keeping  a  comparative  record,  over  a  period,  of  the 
number  of  times  daily  each  head  sends  for  supplies,  an  effective 
leverage  is  furnished  the  manager  by  which  to  discourage  the 
natural  hand-to-mouth  tendency. 

In  other  instances  the  departmental  heads  have  been  con- 
nected with  the  supply  and  tool-rooms,  particularly  the  latter, 
by  means  of  an  annunciator  service.  One  or  more  messengers  are 
then  kept  on  duty  in  the  room,  and  immediately  upon  receiving 
a  bell  the  one  free  goes  to  the  sending  station  indicated.  He 
ascertains  the  needs,  returns  to  the  store  place,  secures  the  neces- 
sary articles  and  immediately  delivers  them.  This  is  the  plan 
followed  at  the  Lodge  &  Shipley  plant.  The  boys  in  charge  of 
a  captain  line  up  on  a  bench  underneath  the  annunciator  board. 
This  service  is  confined  largely  to  tool  issuance,  for  which  it  is 
peculiarly  well  adapted. 

MAKING  IT  UNNECESSARY  FOR  A  WORKMAN 
TO  RUN  AFTER  HIS  OWN  SUPPLIES 

HPO  allow,  much  less  compel,  the  individual  workman  to  fetch 
his  own  supplies  is  manifestly  not  good  policy.     If  he  is  a 
pieceworker,  he  is  sure  to  complain  and  if  a  day  worker,  to  utilize 
the  occasion  for  loafing. 

On  the  other  hand,  it  is  equally  unwise  to  shoulder  too  much 
of  the  stores-issuing  burden  upon  the  foreman.  He  should  closely 
control  the  issuance,  but  be  bothered  as  little  as  possible  with  the 
details.    These  should  be  handled  by  a  clerk  or  other  assistant. 


Storeroom  arrangement  involves  two  main  problems — how  to  build  racks  and  bins  for  handy  storage 
and  how  to  classify  and  index  the  items.  Racks  and  bins  for  special  purposes  are  here  shown. 
In  the  middle  is  the  stock-room  of  the  American  Woodworking  Machinery  Company.  Below  is  an 
arrangement  of  steel  bins  on  sloping  racks  in  the  tool  and  supply  vault  at  the  Thomas  B.  Jeffrey  plant 


mvmmm 

HHhlllllllllll  ill  1  lf| 

mill 
i  i  i 

■UU 

g|ji 

1 

.. 

Methods  of  indexing  stores  are  here  illustrated.  Above,  the  name  of  each  item  is  painted  in  white 
on  the  steel  rack.  At  the  bottom,  shelves  may  be  shifted  as  indicated  by  the  holes.  The  different 
sections  are  indicated  by  letter  and  a  perpetual  inventory  card  appears  opposite  each  item.  In  the 
middle  is  a  combination  of  open  storage  for  large  parts  and  numbered  sections  for  smaller  parts 


DELIVERY   METHODS 


165 


A  trusted  workman,  centrally  located  in  the  department,  can 
often  be  delegated  to  the  task.  In  any  event,  account  should  be 
kept,  by  individual  workmen,  of  all  supplies  issued,  and  the  fore- 
man with  aid  of  this  record  periodically  should  check  up  con- 
sumption.   By  this  means  he  can  hold  wasteful  use  to  a  minimum. 


FIGURE   IX:      This  chart  suggests  eleven  methods  of  linking  the  factory  supply  room  with  the 

workman.      These  plans  are  solving  the  shop  delivery  problem  in  factories  that  vary  widely  in  size 

and  line 


In  case  of  such  articles  as  files  or  needles,  where  breakage  is  a 
factor,  the  worker  should  be  required  to  return  the  broken  or 
otherwise  impaired  tool  before  receiving  a  new  one,  and  the 
foreman  for  his  part  should  be  compelled  to  deliver  these  to  the 
storeroom  in  exchange  for  a  fresh  supply.  No  extra  ones  should 
be  given  without  full  and  sufficient  reason. 

When  each  man's  task  for  the  day  is  completely  mapped  out  in 
advance  and  controlled  from  the  office,  an  exception  to  this 
principle  may  be  made.  Then  often  the  wise  and  economical 
procedure  is  precisely  the  reverse;  the  workers  may  advantage- 
ously get  their  own  supplies.  For  instance,  take  a  gang  of 
shovellers.  Each  man  on  reporting  in  the  morning  should  find 
in  his  compartment,  in  a  rack  near  the  time-clock,  a  slip  telling 
him  where  to  go,  what  work  to  do  and  what  shovel  (or  other  tools) 
to  get  from  storage.  This  is  the  practice  at  the  Bethlehem  Steel 
Works  with  the  yard  men  and  was  instituted  by  Frederick  W. 
Taylor.  One  day  the  gang,  or  part  of  it,  may  be  working  on 
iron  ore;  again  on  pea  coal  or  some  other  material.  For  each 
different  weight  material  a  special  shovel  is  used — a  long  scoop 
for  coal,  a  short  one  for  ore.  Thus  it  is  necessary  that  the  proper 
shovel  in  each  case  be  indicated,  and  delivery  is  most  conveniently 
accomplished  by  having  the  men  singly  stop  at  the  tool  storage 
before  they  go  to  their  stations. 


166  STOREKEEPING 


In  case  of  machine  attendants,  on  the  other  hand,  efficiency- 
is  promoted  by  arranging  for  the  delivery  on  the  spot  of  all 
supplies  and  tools  needed.  To  carry  this  out  effectively  requires 
at  least  three  jobs  to  be  planned  ahead  for  each  operator  con- 
stantly. The  "next"  job,  with  its  requirement  of  tools,  all 
sharpened  and  ready  for  instant  use,  and  other  supplies  or 
parts  needed  must  be  at  the  machine  at  least  an  hour  before  the 
job  on  the  machine  is  scheduled  to  be  finished.  On  the  planning 
board  in  the  shop  at  least  one  other  job  should  be  ready  for  the 
tools  and  materials  required  to  be  made  up ;  and  in  the  office,  or 
planning  department,  a  third  job  should  be  "planned"  ready 
for  issuance  to  the  factory.  This  is,  of  course,  the  last  word  in 
perfection  of  service. 

At  the  Hart-Parr  plant  an  approximation  to  this  scheme  is 
followed  in  issuing  work,  both  to  the  machine  hands  and  to  the 
erectors.  In  the  machine  shop  the  procedure  is  this:  The  jobs 
ahead  of  each  machine  are  mapped  out  on  an  arrangement  rack 
in  the  department  operating  office.  When  the  manipulator  of 
this  rack  observes  that  a  machine  shortly  will  be  ready  for  the 
next  job,  he  calls  a  move-man  and  sends  him  with  the  order  and 
instruction  sheet,  first  to  the  tool-room  and  then  to  the  storehouse. 
If  any  special  tools  are  required  the  tool-room  already  has  been 
advised  of  the  fact,  at  the  time  the  instruction  sheet  was  pre- 
pared, and  it  will  have  these  ready  in  ample  time.  The  move- 
man  loads  the  tools  and  rough  castings  on  a  truck  and  delivers 
them  to  the  proper  machine.  Thus,  when  a  little  later  the 
operator  finishes  his  present  job  and  the  foreman  issues  a  fresh 
one,  the  tools  and  materials  for  it  are  already  waiting. 

Similarly,  in  the  erection  shop  all  the  small  parts  needed  for 
one  traction  engine  are  assembled  in  a  wood  cabinet  by  the 
finished-parts'  storekeeper.  The  order  and  specifications  for 
assembling  also  are  placed  in  this  cabinet.  Consequently  when 
a  workman  completes  one  job  and  is  ready  for  the  next,  he  finds 
everything  that  he  needs  all  together  in  orderly  array  for  him 
and  almost  at  his  elbow. 

The  only  delay  that  ensues  is  while  the  recipient  of  a  cabinet 
checks  off  the  contents.  The  large  parts,  such  as  tractor  wheels 
and  top  boards,  are  delivered  on  the  spot  simultaneously,  or 
practically  so,  with  the  cabinet.    Both  deliveries  are  timed  by 


DELIVERY   METHODS 1G7 

cooperation  between  the  foreman  and  the  storekeeper.  The 
valuable  time  of  the  producer  in  all  cases  is  thus  conserved  for 
the  actual  work  of  production. 


DELIVERING  STORES  BY  TRUCKS  OPERATING 
ON  A  TIME  SCHEDULE 


I 


N  large  plants  motor  trucks,  industrial  railways,  telphers  and 
even  cranes  are  being  utilized  as  adjuncts  of  the  stores  depart- 
ment, in  delivering  supplies  to  the  workmen.  At  the  "Willys- 
Overland  plant,  for  instance,  a  fleet  of  motor  trucks,  connected 
with  the  stock-room,  operates  throughout  the  factory  on  reg- 
ular schedule,  supplying  routine  needs  and  bringing  to  any 
department  special  supplies  as  required.  The  foremen  know 
almost  to  the  minute  when  to  expect  a  truck  and  they  are  pre- 
pared to  place  in  the  hands  of  the  driver  a  statement  of  their 
special  requirements.  These  are  then  filled  on  return  to  the 
storeroom  and  delivered  on  the  next  or  second  succeeding  trip. 

At  the  Ford  plant  motor-driven  telphers  are  constantly  on 
the  move,  reaching  all  parts  of  an  immense  area  and  furnishing 
to  all  an  express  delivery  from  the  storerooms.  As  production 
is  highly  standardized,  the  requirements  are  almost  entirely  of  a 
routine  nature,  and  so  the  telphers  can  be  dispatched  and  routed 
with  practically  the  same  precision  as  railroad  trains. 

For  transmitting  blueprints,  specifications,  samples,  even  small 
tools  and  supplies  from  a  central  point  to  all  parts  of  a  factory, 
pneumatic  tubes  have  in  cases  proved  highly  efficient  and 
economical.  Some  of  the  departments  in  the  General  Electric 
Company  shops  are  thus  connected.  As  a  substitute  for  messen- 
ger service  it  is  far  speedier,  more  reliable,  actually  less  expen- 
sive to  operate  and  in  every  respect  superior. 

The  equipment,  in  this  instance,  is  limited  to  the  handling  of 
articles  of  small  bulk,  for  which  it  was  proportioned.  But  it  is 
entirely  practicable  to  design  pneumatic  carriers  suitable  for 
carrying  quite  large  and  heavy  parcels.  However,  some  type  of 
open,  mechanically  propelled  conveyor  is  in  general  better 
adapted  for  this  purpose,  and  in  operations  where  the  workmen 
need  to  be  supplied  continuously  an  automatic  conveyor,  leading 
from  the, storage  to  the  work  places,  often  furnishes  the  perfect 
means. 


168  STOREKEEPING 


Automobile  wheels  are  delivered  in  this  manner  at  the  Ford 
plant.  The  conveyor  is  a  simple  affair;  in  fact,  it  is  merely  an 
inclined  rail  with  a  pair  of  guide  rails  above.  The  wheels  are 
fed  in  at  one  end  and  roll  down  in  practically  a  continuous  stream 
to  the  point  on  the  assembly  floor  where  they  are  required. 

Molding  sand  in  a  number  of  foundries  is  delivered  by  very 
much  the  same  plan.  The  sand  is  not  left  on  the  floor  from  day 
to  day,  making  it  necessary  for  each  molder  to  take  an  hour  or 
more  every  morning  to  put  his  pile  into  condition.  When  the 
molds  are  knocked  down  the  sand  falls  through  gratings  in  the 
floor,  is  caught  by  a  belt  conveyor  moving  in  a  tunnel  beneath 
and  carried  to  a  conditioning  machine  at  the  lower  end.  The 
output  of  this  machine  is  in  turn  delivered  to  an  overhead  belt 
conveyor  which  automatically  distributes  the  conditioned  sand 
to  hoppers  located  conveniently  along  the  molding  floor.  Each 
molder  then  draws  from  the  hopper  nearest  him  precisely  the 
quantity  of  freshly  prepared  sand  that  he  requires.  Such  an 
arrangement  has  approximately  doubled  the  output  factor  in 
several  plants.  The  Kohler  Company  and  Hart-Parr  Company 
are  two  that  employ  it. 

In  another  instance,  for  delivering  tools  from  a  tool-room  on 
one  floor  to  a  conveniently  located  point  in  the  shop  on  the  floor 
below,  an  overhead  cable  conveyor  has  been  contrived.  The  cable 
is  continuous  and  runs  between  a  pair  of  pipe  rails  suspended 
from  the  ceiling.  The  return  is  directly  beneath  the  lead.  At 
the  terminal  points,  loading  tables  are  arranged  with  finger  plat- 
forms which,  on  the  one  hand,  enable  the  carrier  to  pick  up  and 
on  the  other  automatically  to  deposit  a  tray  of  tools.  The  cable 
turns  on  a  pair  of  large  pulleys,  one  at  either  end.  That  pulley 
at  the  delivery  point  is  driven  by  belt  from  a  nearby  counter- 
shaft. By  this  means  is  overcome  the  handicap  of  a  badly  sit- 
uated tool-vault. 

Location  of  the  storeroom  often  determines  the  method  of 
delivery.  In  a  small  department  served  by  a  centrally  located 
storeroom,  it  is  about  as  economical  to  have  the  men  come  to  the 
window  for  most  of  their  supplies  as  it  is  to  deliver  them  by  boy. 
In  any  event  it  pays  to  have  their  work  and  special  tools  delivered 
on  the  spot. 

In  a  large  factory  composed  of  many  departments  and  having 


DELIVERY   METHODS 169 

one  central  storeroom,  supplies  such  as  waste,  files,  sandpaper 
and  grinding  wheels,  the  delivery  of  which  cannot  conveniently 
be  anticipated,  may  well  be  distributed  from  the  foremen's  offices. 
This  plan  is  almost  always  practical,  whether  or  not  a  produc- 
tion or  time  clerk  is  constantly  in  the  office,  for  an  assistant  fore- 
man whose  section  of  the  floor  is  adjacent  to  the  office  can  be 
delegated  to  handle  the  issuance. 

Only  a  small  quantity  should  be  kept  in  the  department 
offices — a  week's  supply  at  the  most.  In  some  cases  a  day's 
supply  is  the  limit.  Two  reasons  are  given  for  this.  In  the  first 
place,  the  department  offices  usually  are  crowded.  And,  if  the 
storekeeper  is  to  retain  close  control  over  issuance,  the  string 
cannot  be  too  long. 

In  such  cases,  the  routine  of  delivery  must,  of  course,  be 
altered  slightly.  Supplies  issued  for  a  department  office  are 
charged  temporarily  to  the  department  as  a  whole,  instead  of  to 
individual  workmen  or  machines.  The  storekeeper  then  lays 
his  copy  of  the  requisition  aside,  marking  it  "Group  Issuance, 
to  Be  Accounted  for  Later. ' '  In  the  department  office  the  clerk 
or  foreman  who  reissues,  fills  out  a  regular  slip  for  each  item. 
"When  the  supply  runs  out,  he  clips  the  several  record  slips  to  his 
copy  of  the  group  requisition  and  turns  them  over  to  the  store- 
keeper. The  latter,  after  checking  the  various  slips,  clips  them 
to  the  original  copy  and  sends  the  whole  to  the  cost  department, 
returning  the  duplicate  to  the  department  official  for  his  record. 
Thus  to  all  practical  intent  and  purpose,  the  routine  is  the  same 
as  if  the  workmen  individually  went  each  time  to  the  storeroom 
window. 

In  some  lines,  jobs  which  are  not  completed  by  the  end  of  the 
day  furnish  a  complication  where  the  material  is  so  valuable 
that  it  must  be  sent  to  a  storage  vault  for  the  night  whether  fin- 
ished or  not.  Silverware  manufacture  is  an  example.  At  the 
Whiting  Manufacturing  Company,  the  management  has  solved 
the  difficulty  by  building  special  racks  which  operate  in  connec- 
tion with  the  elevator  type  of  hand  truck.  These  racks  have  a 
capacity  of  a  dozen  or  more  trays  of  work.  During  the  day 
they  are  used  as  storage  stands.  Shortly  before  closing  time  all 
work  in  process  is  gathered  into  trays,  and  as  each  tray  is  checked, 
it  is  slid  into  its  place  in  a  rack.     In  a  few  minutes,  a  move-man 


170  STOitEKEEPlNG 


with  an  elevator  truck  takes  all  the  racks  into  the  vault.  Next 
morning,  just  before  the  starting  whistle  blows,  the  department 
foreman  opens  the  vault  and  the  trucker  returns  the  racks  to 
their  regular  positions  on  the  floor.  This  method  insures  the 
safety  of  the  stock  without  breaking  in  on  the  time  of  the  work- 
men. Formerly  the  trays  were  carried  to  and  from  the  vaults 
by  the  individual  workmen,  at  a  waste  of  many  valuable  minutes 
at  either  end  of  the  day. 

So  factory  managers,  by  the  exercise  of  ingenuity  or  the 
utilization  of  a  common  mechanical  principle  or  device,  have 
solved  in  many  ways  the  problem  of  keeping  the  producer  con- 
tinuously supplied  without  loss  of  time  either  to  himself  or  to 
his  machine. 


XVII 

HOW  MUCH  STOCK  TO  KEEP 
ON  HAND 


PROPER  regulation  of  the  amount  of  stock  on  hand  in  each 
line  and  style  manufactured  can  be  determined  accurately, 
but  to  do  so  means  striking  a  complex  equation.  Storage 
facilities,  shop  conditions,  investments  involved,  fluctuations  in 
demand — all  must  be  considered  in  obviating  on  the  one  hand 
shortage  delays  and  on  the  other  high  interest  and  depreciation 
charges.  Stockkeeping  methods  which  have  effectively  controlled 
the  stock  at  a  saving  in  four  figures  have  been  highly  developed 
by  a  concern  whose  annual  sales  run  into  hundreds  of  thousands 
of  dollars.  These  methods,  moreover,  are  so  simple  that  even 
the  small  shop  can  adapt  them  to  its  needs. 

When  a  new  design  has  been  brought  out  and  is  to  be  stocked, 
certain  conditions  are  to  be  met.  This  design  consists  of  several 
sizes  of  the  same  style,  and  both  finished  apparatus  and  parts 
are  to  be  carried  in  stock.  The  part  stock  is  carried  partly  to 
facilitate  the  shipment  of  repair  parts,  but  more  particularly  to 
permit  of  the  quick  assemblage  of  complete  machines  and  the 
economical  manufacture  of  the  parts  themselves.  New  designs 
emanate  from  the  engineering  department  with  the  consent  or  on 
the  order  of  the  sales  department.  If  any  special  tools  are  re- 
quired they  prepare  the  drawings  for  them.  Before  any  manu- 
facturing can  begin,  these  tools  must  be  made. 

An  initial  step  is  to  assign  a  piece  number.  The  piece  number 
may  indicate  a  special  screw,  or  a  single  part,  or  a  complete 
machine  consisting  of  several  thousand  parts  and  costing  thou- 
sands of  dollars.  It  always  identifies  one  object  and  that  one 
only.    If  a  customer  orders  a  certain  piece  number,  and  a  year 


172  STOREKEEPING 


from  now  he  orders  it  again,  he  will  get  within  possible  manu- 
facturing limits  an  exact  duplicate  of  what  he  got  on  his  first 
order.  The  piece  number  is  the  starting  point  of  the  storekeeping 
and  stock  system. 

If  it  seems  advisable  to  make  minor  changes  that  do  not  affect 
the  appearance  or  inter-changeability  of  the  piece  but  which 
should  still  be  taken  care  of  as  a  matter  of  record,  usually;  a  sub- 
letter  is  added  to  the  original  number.  Thus,  1192  may  mean  a 
special  screw  made  of  a  special  composition  of  bronze.  This 
bronze  may  not  be  satisfactory  for  a  certain  use  and  a  new  com- 
position may  be  worked  up  that  has  better  suited  characteristics. 
It  is  very  desirable  to  know  that  the  two  screws  are  different  in 
characteristics  but  identical  in  appearance  and  application.  In 
this  case  the  new  screw  will  be  known  as  1192A  and  so  carried 
in  stock  and  marked.  The  manufacturing  information  will  be 
in  two  parts,  one  calling  for  the  old  style  1192  and  another 
calling  for  the  new  1192 A. 

Distinct  piece  numbers  for  different  styles  greatly  facilitate 
supplying  the  shop  with  manufacturing  information  on  the 
various  parts.  Such  information  is  called  permanent  manu- 
facturing information  (P.  M.  I.),  as  compared  with  that  which 
is  issued  for  some  special  order  and  destroyed  after  the  part  is 
produced.  P.  M.  I.  is  filed  numerically  in  all  sections  of  the 
factory  that  are  concerned.  It  is  kept  up  to  date  by  the  engi- 
neering department,  which  maintains  an  index  of  all  sections 
having  a  copy  of  such  information.  Revision  consists  in  such 
corrections,  or  such  changes  in  the  shop  routing  or  manufacturing 
as  do  not  alter  the  final  result.  When  the  clerk  in  any  section 
gets  a  requisition  for  a  certain  piece  number  he  is  able  at  once 
to  get  full  information  as  to  the  part,  what  it  is,  how  it  should 
be  made,  and  so  on. 

The  design  complete,  the  tools  made,  the  piece  number  assigned, 
and  the  P.  M.  I.  in  the  shop,  all  that  is  needed  is  an  authority 
to  start  manufacture. 

Before  any  competent  manager  will  consent  to  an  expenditure, 
he  wants  to  know  about  it.  To  satisfy  this  natural  and  necessary 
inquisitiveness  of  the  executive  and  fix  the  responsibility  of  all 
persons  concerned,  a  stock  specification  was  devised.  This  con- 
sists of  a  complete  manufacturing  plan  for  the  production  of 


HOW   MUCH   STOCK   TO   CARRY 


173 


the  line  of  apparatus  described,  together  with  the  signatures  of 
the  men  concerned.  As  pretty  nearly  every  one  in  power  is 
involved,  the  final  document  usually  is  a  somewhat  formidable 
one.  The  stock  specification  is  the  official  confirmation  that  the 
manufacture  is  to  start. 

An  examination  of  the  various  forms  making  up  the  specifica- 
tion will  make  plain  the  whole  system.     The  approval  sheet  is 


THE  BETA  MANUFACTURING  COMPANY 


BALKS  DEPARTMENT 


\W^TV«Ay 


Htmitf&Ar'V'fi-.t. 


%i*~  KAUv-**~*-- 


<£,&<*£. 


H  a.C~fa~; 


rim 


ati* 


ti± 


INTERFERENCE  SHEET 


ESTIMATED  COI 
ESTIMATED  COST  OP  TOOL* 


INVESTMENT  I*  STOCR 


ESTIMATED  TIMETO  COMPLETE  FIRST  OflOER         Ma  •«*• 

T«U  Ma  «s><rM*M  «14  Um  .f  ««1»..  n  Rl«  SpMlfMMM 

VALUE  Or  OLD  STOCK  TO  BE  RENDERED  OBSOLETE      tl.UO.OD 

HAVE  ARP.A  NO  C  M  ENTS  SEEN  MADE  TO  DISPOSE  OF  THIS  STOCM    In 

STOCK  SPEC      110. 


FORMS  XXXI  and  XXXU:   When  the  manufacture  of  a  new  line  of  machinery  is  decided  upon,  a 

complete  specification  is  prepared.    The  left-hand  form  is  the  first  page  of  this  set  of  specifications 

and  bears  the  approval  of  various  department  heads.     The  second  page  (right-hand  form)  gives  a 

general  statement  of  the  proposition 

shown  in  Form  XXXI.  It  is  accompanied  by  the  complete 
specification  and  bears  the  approval  of  the  head  of  the  sales 
department  and  whatever  subordinates  he  feels  should  also 
sign  it.  The  form  also  bears  the  signature  of  the  head  of 
the  shop  and  such  of  his  men  as  he  designates.  Finally  it  has 
the  approval  of  the  two  vice-presidents  who  are  in  charge  of 
manufacturing  and  sales,  respectively. 

The  clerk  in  the  engineering  department  who  originally  wrote 
up  the  specifications  fills  out  Form  XXXII.    It  is  compiled  from 


174  STOREKEEPING 


information  gathered  by  him  from  various  sources,  and  the  signa- 
tures on  the  approval  sheet  indicate  that  these  statements  have 
the  assent  of  everyone  concerned.  It  is  especially  for  the  informa- 
tion of  the  vice-presidents,  and  cannot  be  entirely  filled  in  until 
the  data  on  Form  XXXIII  is  given  by  the  sales  department. 

The  quantity  of  the  finished  stocks,  or  number  of  the  com- 
plete machines  to  be  made  and  carried  is  indicated  on  Form 
XXXIII.  The  sales  department  is  supposed  to  know  what  sales 
of  the  specified  line  should  be.  Indeed,  it  is  only  on  their  assur- 
ance that  such  a  line  will ' '  take, ' '  that  it  is  developed.  The  clerk 
fills  in  the  piece  numbers  of  all  the  different  styles.  From  the 
sales  department  he  gets  data  for  the  last  two  columns.  The 
first  of  these  is  the  sales  department's  estimate  as  to  the  mini- 
mum stock  that  should  be  carried  to  enable  them  to  handle  their 
trade,  and  the  second  their  estimate  of  the  minimum  sales  per 
month.  These  are,  of  course,  merely  estimates  and  substitutes 
for  the  more  definite  data  that  the  actual  sales  themselves  will 
soon  furnish.  They  are,  however,  accepted  as  definite,  and  the 
schedule  for  the  first  production  laid  out  accordingly,  both  for 
parts  and  finished  materials. 

HOW  TO  DECIDE  ON  QUANTHTES  OF  STOCK 
WANTED  FOR  NEW  MACHINES 

MEANWHILE,  an  assembling  chart  (Form  XXXIV)  has  been 
made,  showing  just  how  many  of  each  detail  part  go  to  make 
up  a  complete  machine.  This  chart  may  be  a  simple  sheet  as 
shown,  but  more  often  it  is  a  large  drawing  covering  many  styles. 
In  some  cases  it  may  be  a  little  book  in  itself,  but  in  any  event 
it  shows  the  clerk  just  how  many  parts  it  takes  to  make  up  the 
desired  number  of  machines. 

Complete  machines  and  the  parts  therefor,  are  listed  on  sheets 
as  shown  in  Form  XXXV.  The  clerk  fills  in  the  piece  number, 
the  description  and  the  number  of  units  that  the  sales  depart- 
ment desires  to  maintain  as  a  minimum.  He  then  takes  the  docu- 
ment to  the  shop  executive  who  will  have  charge  of  the  actual 
manufacture.  The  storekeeper  is  also  called  in  and  together  they 
decide  on  the  manufacturing  quantities — how  large  an  order  to 
enter  for  each  of  the  finished  machines  and  for  all  the  parts. 


HOW  MUCH  STOCK  TO  CARRY 


175 


This  is  a  big  job  and  one  that  calls  for  many  compromises. 
The  stock  minimums  are  determined  from  the  sales  department's 
schedule.  The  manufacturing  quantity  is  a  compromise  between 
a  desire  on  the  part  of  the  shop  executive  to  make  his  stuff  in 
big  lots  and  the  determination  of  the  storekeeper  to  keep  his 
stocks  down.  An  equitable  basis  is  generally  reached  but  rarely 
without  much  discussion.  Discussion,  however,  is  exactly  what 
a  complicated  problem  of  this  sort  needs.  Though  this  stock 
specification  is  as  yet  merely  a  preliminary  document,  it  is 
the  best  arrangement  that  the  organization  can  make  previous 
to  actually  manufacturing  and  marketing  the  goods. 

Having  fixed  the  quantities,  the  stock  specification  clerk  is  in 
a  position  to  fill  out  the  interference  sheet  (Form  XXXII).     As 


SALES  ESTIMATE  SHEET 

AVAILABLE  SHEET  ,tock.«c.  iio. 

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FORMS  XXXIII-XXXVI:  The  quantity  of  finished  stock  that  will  be  made  and  carried  is  indicated 
in  the  upper  left-hand  form.  The  lower  left  form  shows  just  how  many  of  each  detail  parts  go  to  make 
up  a  complete  machine.  The  "Available  Sheet"  is  filled  out  after  a  conference  between  factory 
department  heads.  The  lower  right-hand  form  is  made  out  at  about  six-month  intervals  and  serves 
as  a  check  on  each  stock  account 


soon  as  this  is  done,  he  is  ready  to  get  the  signatures  shown  on 
Form  XXXI.  The  whole  document  is  made  out  on  tough  bond 
paper  and  after  it  is  completed,  blueprints  are  prepared  and  dis- 
tributed to  the  various  interested  parties. 


176  STOREKEEPING 


The  principal  copy  is  that  which  goes  to  the  storekeeper  and 
authorizes  him  to  maintain  the  stocks  at  the  values  given  thereon. 
He  immediately  opens  an  account  with  each  of  the  piece  numbers 
in  his  ledgers,  as  shown  on  Form  XXXVII,  and  enters  orders  in 
the  shop  for  the  manufacturing  quantity  specified  in  the  stock 
specifications.  His  ledger  account  consists  of  a  page  for  each 
piece  number  and  gives  the  information  shown.  It  may  be  that  on 
some  other  stock  specification  he  is  already  carrying  a  piece  that 
is  specified  anew.  If  so,  he  simply  adds  the  manufacturing  quan- 
tities and  the  minimum  availables  on  the  new  stock  specification 
to  those  that  he  already  has  and  handles  the  account  just  as  he 
would  if  there  were  but  one  specification  with  the  combined 
quantity  called  for. 

The  ledger  clerk  in  the  storeroom  office  watches  his  accounts 
and,  whenever  the  balance  of  stock  falls  to  the  minimum,  he 
enters  a  new  order  for  the  manufacturing  quantity  stated.  The 
accounts  are  thus  running  ones  and  unless  the  stock  specification 
is  changed  they  go  on  indefinitely. 

To  provide  for  a  better  check  on  each  account,  however,  the 
storekeeper  has  an  abstract  made  about  six  months  after  the 
specification  goes  into  force  and  every  six  months  thereafter. 
This  abstract  is  taken  from  the  ledgers  by  a  special  clerk.  He 
makes  the  rounds  as  fast  as  he  can.  The  exact  time  for  sending 
through  the  abstracts,  however,  is  immaterial.  The  general 
character  of  the  abstract  is  shown  in  Form  XXXVI.  It  gives  the 
average  monthly  withdrawals  for  the  period  indicated  and  the 
name  of  the  part  and  its  value  in  factory  cost.  It  is  sent  to  all 
parties  concerned,  with  a  proposal  to  revise  the  specification  in 
line  with  the  consumption.  If  there  are  no  dissenting  voices,  this 
is  done. 

The  stock  minimum  is  usually  fixed  at  one  month 's  stock.  The 
manufacturing  quantities  based  on  the  actual  business  in  sight 
are  then  determined  by  the  shop.  The  specification  is  revised, 
and  the  figures  in  the  ledgers  are  changed  to  agree.  After  the 
revision,  only  minor  changes  are  usually  necessary,  as  the  line 
is  then  probably  selling  at  a  normal  rate  and  will  do  so  perhaps 
for  some  years. 

If  it  could  be  guaranteed  that  the  line  would  remain  in  suc- 
cessful production  for  a  long  period  or  that  the  sales  would  very 


HOW  MUCH  STOCK  TO  CARRY 


177 


gradually  alter,  the  stock  would  take  care  of  itself.  If  the  sales 
were  increasing  the  quantities  would  gradually  increase  and  the 
stock  would  keep  pace  with  the  demand.  If  the  sales  started 
to  fall  off  the  stock  would  gradually  taper  off  and  no  losses  would 
ensue.    This  is  an  ideal  condition  and  most  lines  do  behave  in 


PICCC          9160 
MIN.  AVAIL.         12 

6*  X  9"  Cnglim  *itb  eondonner 
MFG.  QUANTITY             30 

FACTORY  COST         K, 150.00 
STOCK  SPEC.         110 

rO 

RECEIPTS 

WITHDRAWALS 

ORDER 

NO. 

DATE      |  DELIVERY 

DATE 

ORDER 

NO. 

DATE 

STOCK 

DATE 

11875 

30 

10-5-14  |         10 

11-15-14 

X21617 

2 

12-1-14 

20 

11-25-14 

X21618 

3 

12-5-14 

X  5563 

T 

12-6-14 

X21622 

e 

12-7-14 

11692 

30 

12-8-14 

10 

1-1-15 

X  216  30 

3 

1-1-15 

10 

1-15-15 

X  21700 

15 

2-5-15 

60 

10 

1-20-15 

X21B55 

3 

2-8-15 

41 

60 

41 

19 

2-9-15 

rO 

FORM   XXXVII:      An  account  with  each  piece  number  covering  all  receipts  and  withdrawals  is 

opened  by  the  storekeeper  on  the  looseleaf  ledger  form  shown  here.       Cost,  minimum  availablel 

quantity  to  be  manufactured  and  specifications  are  also  noted 

that  manner.  When,  however,  a  large  change  in  the  consumption 
of  a  stock  occurs,  loss  due  to  overstock  usually  results,  if  sales 
suddenly  fall,  or  a  series  of  delays  in  delivering,  if  sales  increase. 
As  the  system  itself  is  based  on  predicting  the  future  from  the 
past,  left  to  itself  it  would  often  go  wrong;  for  business  does 
not  follow  so  simple  a  law.  Hence  the  abstract,  which  is  calcu- 
lated to  bring  to  bear  the  best  talent  for  prophecy  which  the 
organization  affords. 

Fluctuations  in  the  sales  usually  follow  the  introduction 
of  a  new  article  into  the  market  or  a  change  in  outside  con- 
ditions. In  so  far  as  the  outside  market  is  concerned,  the  sales 
force  should  know  what  is  coming,  and  when  they  anticipate  a 
change  for  the  better  or  worse  in  the  sales  of  a  particular  article, 


178  STOREKEEPING 


they  are  bound,  upon  getting  their  copy  of  the  abstract,  to  recom- 
mend that  the  production  for  the  following  period  should  be,  say, 
fifty  per  cent  higher  than  in  the  past  or  that  it  should  be  halved. 
And,  although  other  departments  are  welcome  to  make  their 
recommendations,  the  recommendations  of  the  sales  department 
are  usually  taken  as  final  in  this  regard. 

Another  reason  for  a  sudden  change  in  the  sales  is  the  develop- 
ment of  a  new  and  better  line  by  the  concern  itself.  This  usually 
blankets  any  older  lines  which  are  similar  and  stocks  must  be  in 
shape  to  meet  the  shock.  It  is  the  engineer's  place,  when  he  has 
a  change  in  mind,  to  issue  proper  instructions  so  that  the  stock 
may  be  kept  down  to  a  point  where  the  new  line  will  nicely 
replace  the  old. 

All  these  features  are  covered  in  the  approval  of  the  abstract. 
The  cost  of  the  parts  is  given  to  emphasize  the  fact  that  stock  is 
real  tangible  money — something  that  all  are  a  little  prone  to 
forget.  It  also  shows  whether  the  stock  is  in  good  shape  or  not. 
If  there  are  two  hundred  pieces  of  a  certain  part  and  the  monthly 
consumption  is  ten,  it  is  evident,  as  a  rule,  that  someone  has 
"slipped  up."  All  hands  are  responsible  for  finding  who  is  at 
fault  and  what  is  the  best  way  out  of  the  difficulty.  If  these 
parts  are  screws  and  the  value  given  is  twenty  cents  a  hundred, 
no  one  will  bother  with  it;  whereas  if  the  part  in  question  is 
worth  a  dollar  or  more  it  is  evident  that  any  way  in  which  this 
surplus  stock  can  be  disposed  of  will  be  a  much  welcomed  money- 
saver. 

Sometimes  the  sales  department  can  make  arrangements  to 
work  off  this  surplus  by  cutting  the  price.  Indeed,  the  slow 
movement  of  a  certain  size  may  mean  that  the  price  for  that 
particular  size  is  too  high.  Thus  the  abstracts  often  prove  of 
great  value,  if  for  no  other  reason,  merely  by  keeping  the  sales 
department  in  touch  with  their  problem. 

So,  too,  the  engineer  as  he  looks  over  the  abstract  can  see  how 
certain  idle  parts  or  machines  can  be  altered  to  make  them  salable. 
A  machine  may  be  carried  in  two  styles  of  finish  or  paint ;  often 
refinishing  or  repainting  where  possible  will  "move"  the  stock. 
The  engineer  can  sometimes  see  where  it  will  pay  to  draw  out 
certain  idle  sizes  and  modify  them  in  other  ways  to  make  them 
active  stock. 


HOW   MUCH   STOCK   TO   CARRY 179 

Frequently  the  accumulation  of  inactive  stock  can  be  prevented 
by  the  establishment  of  a  storeroom  for  finished  parts.  Instead 
of  manufacturing  for  finished  machines,  an  improved  stores  sys- 
tem of  manufacturing  finished  units  for  stock  was  developed  in 
the  plant  of  the  Lodge  &  Shipley  Machine  Tool  Company,  with 
the  result  that  it  takes  only  three  days  from  the  receipt  of  an 
order  to  assemble  and  ship  a  lathe.  As  many  parts  have  more 
than  one  specified  use,  the  plan  makes  the  factory  much  more 
flexible  and  responsive  to  sales  demand. 

For  manufacturing  considerations,  the  lathe  is  divided  into 
several ' '  groups, ' '  and  each  group  into  its  component  small  parts. 
All  lathes  consist  of  similar  groups  and  similar  small  parts  not 
differing  materially  except  in  size.  For  example,  some  of  the 
groups  making  up  a  lathe  are  head-stock,  tail-stock,  carriage, 
apron,  and  so  on ;  some  of  the  small  parts  making  up  the  head- 
stock  group  are  the  spindle,  driving  pulley,  and  face  gear.  Each 
piece  is  given  its  individual  piece  number.  Similar  pieces,  re- 
gardless of  the  size,  carry  the  same  piece  number;  the  size  of 
the  lathe  for  which  the  piece  is  to  be  used  is  designated  by  letter. 
For  example,  B-697  is  a  fourteen-inch  spindle ;  C-697  is  a  sixteen- 
inch  spindle,  and  so  on. 

REDUCING  THE  EXPENSE  OP  "CHANGE-OVERS" 
UNDER  THE  STORES  SYSTEM 

rPO  manufacture  for  the  storeroom  instead  of  for  the  assem- 
bling  floor  is  the  new  plan.  Small  parts  and  groups  as  they 
are  completed  are  delivered  to  the  storeroom.  On  receipt  of  a 
customer's  order  the  necessary  groups  for  making  up  the  lathe 
called  for  are  ordered  out  from  the  storeroom  to  the  assembling 
floor. 

The  storeroom  is  divided  into  two  sections.  One  section,  the 
group  store,  receives  assembled  groups  until  such  time  as  they 
are  required  for  the  erection  of  lathes.  The  other  section,  the 
parts  store,  is  arranged  for  carrying  small  parts  in  quantities. 
No  parts  are  issued  from  the  parts  store  to  the  assembling  depart- 
ment until  all  pieces  necessary  to  finish  the  group  on  that  par- 
ticular order  have  been  received. 

Shop  orders  for  lathes  are  subdivided  into  groups  and  each 


180  STOREKEEPING 


group  is  brought  through  on  an  individual  order.  This  allows 
the  quantity  of  each  separate  piece  to  be  varied  to  suit  manu- 
facturing conditions.  Pieces  which  can  be  machined  more 
economically  in  larger  quantities  than  the  number  of  the  groups 
being  brought  through  at  that  time  are  detached  from  these 
groups  and  brought  through  on  a  separate  stock  order.  When 
these  pieces  are  finished  they  are  stored  in  the  proper  bin  among 
the  other  pieces  which  are  being  brought  through  on  the  regular 
group  order. 

A  tag  on  each  bin  states  the  piece  number,  the  amount  of  the 
order,  the  date  ordered,  the  minimum  stock,  and  the  shop  order 
number  on  which  the  next  lot  is  being  brought  through.  Thus 
the  storekeeper  can  see  at  a  glance  how  nearly  complete  his  parts 
are  for  a  certain  group  without  referring  to  his  records  to  find 
in  which  section  a  piece  is  stored. 

Similarly  in  the  group  store  the  orderly  arrangement  of  the 
various  groups  on  the  floor  makes  its  easy  to  see  just  what  parts 
are  on  hand. 

The  storekeeper  runs  a  complete  card  record,  with  a  separate 
card  for  each  group,  showing  the  quantity  and  the  shop  order 
number.  There  is  also  a  space  provided  for  checking  off  addi- 
tional groups  received  or  any  that  may  be  disbursed,  so  that  the 
card  contains  always  a  complete  record  of  the  exact  quantity  on 
hand. 

Although  economy  of  manufacture  is  not  the  prime  object  of 
this  system,  it  is  an  important  item.  Under  the  former  plan  the 
same  number  of  each  small  part  was  ordered  as  there  were  lathes 
in  the  finished  lot.  Using  the  parts  storeroom,  it  is  practical  to 
manufacture  certain  small  parts,  requiring  a  considerable  setting- 
up  time  for  the  machine  operations,  in  lots  of  several  hundred 
instead  of  fifty. 

Under  the  stores  system  practically  all  sizes  of  lathes  may  be 
erected  at  one  time;  thus  mixed  orders  can  be  filled  promptly. 

This  plan  has  greatly  reduced  the  expense  of  ' '  change-overs. ' ' 
Under  former  conditions  the  firm  was  frequently  called  upon  for 
prompt  delivery  of  fourteen-inch  by  eight-foot  patent  head  lathe, 
while  the  only  finished  machine  on  hand  of  that  size  was  a  four- 
teen-inch by  eight-foot  three-step  cone  head  lathe.  The  stock 
machine  then  had  to  be  "changed  over"  to  the  desired  style. 


:§-J] 

Cr™ 

Ma 

IS 

How  the  delivery  of  stores  has  been  standardized  is  here  shown.  Small  parts  are  arranged  in 
racks  handy  to  the  workbench  at  the  Cadillac  Motor  Car  Company  (top).  At  the  Hart-Parr  plant  a 
cabinet  (middle)  stored  with  all  the  small  parts  for  one  machine  is  transported  by  crane  to  the 
point  of  assembly.     Below  are  special  trucks  for  delivering  parts  to  the  assemblage  at  another  plant 


HOW   MUCH   STOCK  TO   CARRY 183 

The  promptness  with  which  a  complete  lathe  can  be  assembled 
by  drawing  from  groups  in  the  storeroom  has  nearly  eliminated 
this  expense  of  tearing  down  and  rebuilding  a  lathe  which  has 
once  been  completed. 

Another  advantage  is  greater  promptness  in  handling  repair 
orders.  Eepair  parts  can  be  supplied  from  regular  stock  in  the 
storeroom.  This  method  does  not  upset  production  as  it  did  to 
rush  through  a  single  piece  of  one  kind.  An  important  manu- 
facturing economy  is  the  result.  Any  shortage  in  the  store  thus 
incurred  can  be  remedied  on  the  next  succeeding  shop  order. 

Moreover,  the  total  investment  in  stock  is  considerably  reduced, 
notwithstanding  the  amounts  carried  in  the  group  and  parts 
store,  because  there  never  is  a  large  quantity  of  unsold  lathes  left 
over  from  a  lot  just  completed  and  because  a  smaller  stock  of 
raw  material  is  now  adequate.  The  method  thus  combines  flexi- 
bility with  economy  of  investment. 

Frequently,  however,  it  is  desirable  to  carry  more  stock  than 
the  present  storage  facilities  of  the  plant  permit.  In  such  cases 
the  manufacturer  should  not  allow  his  storage  limits  to  hamper 
him  without  first  taking  a  fresh  viewpoint  on  the  stock  problem. 
Sometimes  a  slight  change  in  dimensions  makes  it  possible  to 
"nest"  the  product.  Again,  to  handle  it  knocked-down  multi- 
plies storage  capacity. 

Because  of  their  bulk,  steel  boxes  recently  became  a  problem 
in  the  assembling  and  stock-rooms  of  the  plant  which  produced 
them.  The  process  was  to  fold  the  box  on  a  punch  press,  japan 
it  and  assemble.  After  the  first  fold  it  was  difficult  to  handle 
and  took  up  a  great  deal  of  space  in  the  japanning  oven  and 
storeroom.  Consequently,  it  was  decided  to  omit  the  last  punch 
press  operation  and  to  leave  the  steel  in  a  long  strip,  which  is 
japanned  and  stored  until  called  for.  A  boy  then  assembles  the 
box  by  turning  the  ends  in  a  jig.  It  can  not  be  formed  in  the 
press  because  of  spoiling  the  coat  of  japan. 

Simple  changes  such  as  this  often  solve  storage  problems  and 
leave  the  manager  free  to  decide  his  stock  limits  by  larger  con- 
siderations. In  this  instance  the  capacity  of  japan  ovens  and 
storage  shelves  was  multiplied  by  ten,  and  the  cost  of  both  japan- 
ning and  folding  was  much  reduced. 


XVIII 

FORMS  AND  SYSTEMS  FOR 
STOREKEEPING 


GOOD  storekeeping  principles  are  fundamentally  the  same 
for  all  the  various  sizes  and  types  of  factories.  The  large 
shop  may  have  a  central  organization,  sub-storerooms, 
and  a  system  based  on  several  detailed  forms.  On  the  other 
hand,  the  manufacturer  whose  annual  business  can  be  measured 
in  five  figures  or  less,  generally  does  not  find  it  necessary  or 
expedient  to  use  such  precautions  and  measures  for  the  adequate 
control  of  stores.  A  single  storeroom  and  a  few  forms  perhaps 
answer  his  purpose.  But  the  storekeeping  methods  of  both  small 
and  large  manufacturers,  if  their  costs  are  being  kept  at  rock- 
bottom,  automatically  indicate  wastes,  furnish  comparative 
records  of  expense  for  supplies  and  materials,  and  guide  pur- 
chasing between  overstock  and  shortage. 

The  experience  of  manufacturers  in  many  lines  has  developed 
some  exceedingly  thorough  stores  systems.  A  study  of  these 
methods  was  the  basis  upon  which  the  Reed  &  Prince  Manu- 
facturing Company  erected  their  storekeeping  system,  which 
takes  care  of  stores  of  every  sort  and  is  widely  applicable.  How 
this  system  operates  is  told  in  Mr.  Reed's  own  words. 

Our  system  of  handling  stores  [says  Mr.  Reed]  keeps  account 
of  all  the  raw  materials  that  are  needed  in  the  manufacture  of  our 
regular  products — wood  screws,  rivets,  bolts,  machine  screws  and 
so  on,  and  all  the  supplies  necessary  for  the  manfacture  of  these 
classes  of  goods.  Moreover,  it  has  enabled  the  purchasing  depart- 
ment to  keep  in  close  touch  with  the  stores  department  and  has 
so  centralized  records  and  materials  that  one  clerk  can  look  after 
the  work. 


FORMS  AND  SYSTEMS 185 

The  stock  carried  by  the  storeroom  includes  raw  material, 
wire  and  rods;  the  tools  necessary  for  forming  the  raw  material 
into  finished  product,  and  packages  and  labels  for  preparing 
the  product  for  shipment.  It  is  necessary  also  to  keep  repair 
parts  on  hand  for  machinery  which  is  used  throughout  the 
factory  and  other  supplies  which  are  necessary  to  keep  the 
whole  plant  in  running  order.  To  sum  up,  in  our  factory  the 
stores  department  handles  all  the  necessary  materials  from  raw 
material  and  coal  to  stationery  and  office  appliances. 

No  part  of  the  accounting  is  dOne  in  the  storeroom  except  the 
handling  of  requisitions  for  goods  delivered  and  the  slips  for 
goods  received.  It  is  possible,  by  keeping  track  of  the  relation 
between  goods  delivered  and  goods  received  in  the  purchasing 
department  office,  to  keep  the  necessary  purchases  to  the  mini- 
mum limit  at  all  times  so  that  the  amount  invested  in  stores  and 
other  material  is  right.  Moreover,  the  records,  as  will  be  pointed 
out  in  the  subsequent  pages,  are  so  arranged  that  they  are  avail- 
able for  future  reference.  It  is  always  possible  to  tell  how  much 
of  any  particular  item  to  purchase  or  to  have  made  in  the  factory. 
This  simplifies  the  work  for  the  purchasing  department.  In 
most  cases  it  is  only  necessary  to  state  the  standard  quantities 
which  are  to  be  purchased  and  the  purpose  for  which  the  article 
is  used.  The  detail  work  of  ordering  is  done  by  a  competent 
clerk  in  our  purchasing  department. 

To  install  this  system  a  list  was  first  made  of  every  article  that 
was  to  be  kept  in  stock.  This  is  a  fundamental  proceeding  for 
a  storeroom  system.  Without  the  list  little  can  be  accomplished. 
Properly  classified  it  forms  the  basis  for  correct  ordering. 

The  second  step  necessary  in  working  up  a  stores  system  is  to 
arrange  a  set  of  books  of  account  for  such  articles  as  are  received 
and  distributed.  There  are  three  sets  of  these  books  in  our 
offices.  The  stock  account  books  (Set  I)  consists  of  a  series  of 
looseleaf  books  (Form  XXXVIII),  in  which  daily  entries  are 
made,  showing  how  much  stock  has  been  ordered,  how  much  re- 
ceived and  what  has  been  delivered  out  of  stock  each  day.  The 
weekly  stores  report  (Set  II)  shows  the  amount  of  each  stock 
article  on  hand  at  the  end  of  each  week.  This  also  is  kept  in  a 
looseleaf  ledger  (Form  XXXIX).  The  depleted  stock  list  (Set 
III)  is  a  tabulation  (Form  XL)  of  the  condition  of  items  run- 


186 


STOREKEEPING 


ning  short.     From  it  new  orders  are  made  out,  and  old  orders 
are  hurried  when  necessary. 

In  addition  to  the  three  sets  of  books  described,  a  reference 
book  is  made  up  for  the  purchasing  agent,  which  contains  a  dupli- 
cate of  the  stock  list.    In  this  book  is  recorded  the  amount  of  each 


Maximum 

20.000  lbs. 

.400  BASIC  HIKE 

Minimum    5, 

000   3 

ktu 

Requisitions 

Deliveries 

Requisitions 

Deliveries 

Order 

Order 
No. 

Amt 

Rec'd 

BaL 

Due 

Amt. 

Dept 

Cost 

Bal. 
on 
Hand 

Date 

Order 
Ho 

Amt. 

Rec'd 

Bal. 
Due 

Amt 

Dept. 

Cost 

BaL 
on 

Hand 

FORMS  XXXVm-XL:    All  these  records  are  handled  in  the  factory  office  by  one  clerk.  From  them 

the  purchasing  agent  keeps  accurate  account  of  all  raw  material  used  in  the  factory.      The  records 

are  simplified  and  compact 

stock  article  used  during  each  quarter  with  a  space  for  recording 
the  total  amount  used  each  year.  This  books  shows  the  pur- 
chasing agent  the  condition  of  all  regular  stores  and  also  enables 
him  to  compare  the  stock  used  in  different  quarters  by  periods. 
The  book  sets,  Nos.  1,  2  and  3,  and  the  additional  reference 
book  just  described  enable  the  purchasing  agent  not  only  to  keep 
an  accurate  account  of  all  the  regular  supplies,  but  to  check 
misuse  of  supplies  and  to  control  closely  the  purchasing  of 
materials  and  supplies. 

KEEPING  TRACK  OF  MATERIALS,  SUPPLIES 
AND  TOOLS  BY  DEPARTMENTS 


TH  0  keep  track  of  the  raw  material,  tools  and  miscellaneous 
supplies  which  are  used  in  the  factory  is  the  next  step  in  han- 
dling the  system.  The  basic  stock  list  to  which  reference  has  been 
made,  is  divided  so  that  every  section  is  a  list  of  the  articles 
used  in  one  department., 


FORMS  AND   SYSTEMS 


187 


The  foreman  of  every  department  is  provided  with  a  list  which 
shows  what  stock  is  carried  for  his  purposes  in  the  storeroom. 
In  listing  this  stock  the  tools  and  miscellaneous  supplies  are 
tabulated  according  to  their  names,  but  in  case  of  repair  parts  it 
has  been  necessary  to  list  by  number.  Consequently,  in  order 
that  a  foreman  may  specifically  and  accurately  know  repair  parts, 
each  department  head  is  given  an  alphabetical  list  of  the  repair 
parts  for  his  department  which  are  carried  in  the  storeroom, 
together  with  their  index  numbers. 

The  storeroom  is  provided  with  a  numerical  list  of  these  parts, 
which  gives  the  name  and  location  of  each.    Every  part  has  a 


Dat'                                Stores  Requisition                            ForD,pt 

Jan.  U,  1915                                         wmwm  neijuioiuuii                                                  Machine 

Items  Wanted 

Bin 

3  pr.             1x8  r.  H.  V.  S.  Dies 

K  -  3 

Ordered  ty           Kana                                                Delivered 

H.        1. 

For  Order  No.         _tsj. 

A 

B. 

FORM  XLI:      Simplicity  marks  this  stores  requisition.     All  the  important  items  are  covered  and 

ample  space  is  provided  for  each  and  also  for  any  notations  the  stock  clerk  may  find  necessary.    The 

slip  is  standardized  in  size  for  filing  purposes 

definite  place  in  the  storeroom  so  that  it  can  readily  be  found 
by  the  storekeeper. 

When  a  foreman  wants  material  of  any  sort  from  the  store- 
room he  specifies  the  articles  on  store  requisition  slips  by  name 
or  number  as  provided  for  in  his  lists.  He  then  sends  these 
requisition  slips  (Form  XLI)  to  the  storeroom  and  the  material 
or  parts  are  delivered. 

When  the  stores  clerk  makes  the  entry  in  the  stores  account 
books,  the  cost  of  the  material  delivered  is  recorded  on  the 
requisition.  Eequisitions  are  filed  behind  tabbed  cards  arranged 
according  to  departments. 

In  making  out  the  requisition  the  foreman  must  be  careful  to 


188  STOREKEEPING 


list  accurately  just  what  material  or  repair  parts  he  wishes.  The 
stores  clerk  has  orders  to  check  very  carefully  all  foremen's 
requisitions  so  that  the  records  will  call  for  items  listed  exactly 
as  they  are  in  the  regular  list  of  stores  kept  on  hand.  This 
avoids  confusion  in  tabulating  the  records  of  disbursements  and 
standardizes  to  a  great  degree  the  work  of  purchasing.  If  the 
articles  ordered  by  the  foreman  are  not  specified  properly,  cor- 
rections are  made  on  the  slips  by  the  stores  clerk  so  that  there 
will  be  no  mistakes  when  the  slips  are  entered  on  the  stores 
account  books. 

That  a  close  check  may  be  maintained  upon  the  amount  of 
stores  used  by  each  department,  every  week  the  stores  clerk 
makes  out  a  condensed  report.  There  are  three  regular  items 
which  every  department  in  the  factory  uses.  In  some  depart- 
ments the  subject  of  the  expense  account  varies,  and  it  is  advisable 
to  change  the  headings  of  the  columns  shown  to  meet  these  differ- 
ent requirements.  As  the  average  expense  account  has  been  de- 
termined for  ordinary  conditions,  these  weekly  storeroom  reports 
make  it  easy  to  watch  for  extraordinary  charges  which  may 
need  investigation.  In  making  up  this  storeroom  report  the 
requisitions  which  are  sent  from  all  departments  by  the  foremen 
are  grouped  according  to  the  headings  on  the  storeroom  report 
sheet  and  the  expense  recorded  in  the  proper  column. 

HOW  A  COLOR  SCHEME  SAVES  TIME 
IN  HANDLING  STOCK 

r>  AW  material,  tool  steel  and  machinery  steel  are  kept  track 
of  by  approximately  the  same  record  system  as  the  other 
regular  stock.  The  sizes  and  kinds  of  steel  are  listed  and  divided 
into  two  accounts — tool  steel  and  machinery  steel.  The  quan- 
tities of  steel  are  tabulated  under  these  heads  according  to  the 
shape — round,  square,  or  flat.  A  daily  inventory  is  kept  of  the 
size,  shape,  length,  and  weight  of  steel  taken  from  stock  for  the 
various  departments.  This  record  comes  each  day  to  the  stores 
clerk  on  a  card  (Form  XLII).  From  this  record  the  details  are 
tabulated  in  the  looseleaf,  stock  account  book. 

To  save  time  lost  in  handling  short  lengths  of  stock,  the  bars  of 
steel  are  striped  the  whole  length  in  a  color  to  indicate  the 
purpose  for  which  the  steel  is  used.    If  only  a  section  or  one 


FORMS   AND   SYSTEMS 


189 


end  of  a  bar  were  striped,  the  length  remaining  after  any- 
machine  operation  which  removed  the  stripe  would  likely  be 
confused  with  short  lengths  of  different  compositions.  The 
column  headed  "Color,"  therefore,  indicates  the  kind  of  steel: 
self -hardening  steel  is  painted  red ;  header  dies,  white ;  r.  t.  dies, 


Department  2 

Date         Jan    30th,   1914 


Steel  Taken  from  Stock 


>««■!■      M  «•       ItePt,     Hafld"  \ :  Oat.  Del  id      J  fcpt  H*ff 


/-.rtitf  -i  fe- 


/,?a-'/^  Floor    -/a^ 


a-uuity 


Quantity 


Deliver  to  Dept.    <5* 
No.  of  Operator         7& 


■3/f 


¥££: 


FORMS  XLII-XLV:  At  the  left  is  a  steel  stores  report.  Requisitions  for  oil  |and  raw  stock  are 
illustrated  at  the  bottom  (center  and  right);  and  a  stock  record  of  office  and  stationery  supplies  is 
shown  in  the  form  at  the  top  (right).     This  stock  record  is  kept  hanging  at  the  end  of  the  shelves 

green ;  cutting  tools,  w.  s.  cutters,  hobbs,  shaver  cutters,  formed 
cutters  and  c.  t.  dies,  orange ;  crucible  steel  and  low  grade  steel, 
blue ;  machinery  steel,  yellow.  This  saves  a  great  deal  of  material 
otherwise  wasted. 

The  raw  material  which  is  kept  in  stock— wire,  nuts,  rods  and 
burr  plates— is  piled  up  in  sections  allotted  every  size  and  kind. 
Operators  using  this  material  requisition  it  on  slips  provided 
for  that  purpose  (Form  XLIII),  showing  the  kind,  amount,  and 
size  of  wire  needed.  The  weights  of  the  wire  delivered  are 
recorded  on  these  slips,  and  from  them  entries  are  made  into 
the  stock  account  books,  showing  the  amounts  which  have  been 
taken  from  stock. 

For  handling  the  oil,  a  tank  is  installed  on  every  floor  of  the 
factory.  Each  tank  contains  a  barrel  of  the  several  grades  of 
oil  used  in  the  departments  on  that  floor.  These  tanks  are  filled 
whenever  necessary,  and  oil  is  requested  on  the  regular  stores 
requisitions. 

For  keeping  a  detailed  account  of  the  oil,  cards  are  delivered 
on  each  floor,  to  the  foreman's  clerk  who  has  charge  of  tne  oil 
tank     When  any  can  is  filled  the  kind  of  oil  taken  and  the 


190  STOREKEEPING 


number  of  the  can  are  recorded  on  one  of  these  slips  (Form 
XLIV)  so  that  it  is  possible  to  tell  where  oil  is  used.  Records 
are  made  from  these  cards  showing  the  amount  of  every  kind  of 
oil  on  each  floor  per  week. 

For  some  articles  which  are  carried  in  stock  individual  account- 
ing in  the  weekly  stores  report  would  be  cumbersome.  This  is 
true  of  machine  screws  and  labels.  For  this  purpose  ordinary 
ledger-ruled,  three-by-five  cards  are  used  (Form  XLV),  and  each 
card  is  considered  sufficient  for  two  sizes  of  labels  or  machine 
screws. 

In  order  that  new  material  can  be  ordered  in  ample  time,  the 
stores  clerk  reports  such  of  these  articles  as  are  below  the  min- 
imum limit.  Requisitions  for  these  two  items  are  sent  into  the 
storeroom  the  same  as  for  other  articles,  but  the  records  are  kept 
as  simple  as  possible  on  the  cards  instead  of  in  the  stock  account 
books. 

Goods  which  are  made  in  the  factory  and  delivered  to  the  store- 
room for  regular  stock  are  ordered  on  what  are  known  as  tools 
and  fixtures  slips  (Form  XLVII).  These  orders  are  made  out  in 
triplicate  from  the  depleted  stock  list  and  two  copies  are  given 
to  the  department  in  which  the  goods  are  made ;  the  third  copy 
is  kept  in  the  storeroom  for  reference.  As  soon  as  these  orders 
are  written,  entries  are  made  in  the  stock  account  books  showing 
what  has  been  ordered,  the  amount,  order  number  and  date. 
These  order  numbers,  in  the  case  of  tools,  are  used  for  con- 
venience in  locating  the  order  and  keeping  track  of  it  in  process. 
The  number  itself  has  no  particular  reference  to  the  kind  of 
tools  which  are  being  made.  In  the  case  of  repair  parts,  how- 
ever, the  order  number  and  the  index  number  are  identical. 

Orders  for  special  tools  and  fixtures  are  made  out  on  tools 
and  fixtures  slips  the  same  as  those  for  regular  goods,  with  the 
exception  that  they  are  stamped  ' '  special. ' '  These  special  items 
are  listed  on  sheets  and  each  department  has  a  separate  sheet  for 
special  goods  which  it  is  asked  for.  On  these  sheets  the  order 
is  described;  and  the  date  of  receipt,  number  of  the  order,  date 
of  delivery,  number  of  pieces  and  the  cost  are  tabulated.  By  this 
means  an  account  is  kept  of  the  expense  of  special  tools  and 
fixtures,  and  it  is  a  simple  matter  to  distribute  this  report  to  the 
various  departments,  so  that  they  can  at  once  advise  whether  or 


FORMS  AND   SYSTEMS 


191 


not  to  adopt  some  of  these  special  items  as  regular  stock.  This 
record  shows  also  whether  the  foreman  has  used  good  judgment 
in  getting  out  his  specifications. 

In  checking  deliveries  of  goods  received  each  day  in  the  store- 
room, for  which  the  tools  and  fixtures  slips  call,  a  special  record 


Oats       J--  *n    101* 

Completed  Stock  Received  Department  2 

03 
A2 

From  DepL  No. 

Name  of  Article  and  Index  No. 

Order  No. 

Pieces 

lfl_.. 

Punch  Bar  Hoek     -as 



For  Dept 
3 

Tools  and  Fixtures 

Date 

1-8-14 

Workmsn                                                                     That 

Kind  of 

Work 

Materia 

Klnd_ Size                               !-■■■■» 

Date                                                               Order  No. 

Size    , 

1/2  <  a/i« 

*     MB  BRASS   IIIVBTS 

Boxes 

* 

500  lbs. 

FORMS  XLVI-XLVIII:    In  the  middle  is  shown  a  shop  order  for  tools  and  fixtures  for  "home" 

consumption.     At  the  back  is  a  record  that  helps  check  deliveries.     By  filing  these  slips  (front)  as 

described,  minimum  and  maximum  stock  quantities  can  be  conveniently  fixed  for  the  factory 


like  that  shown  in  Form  XL VI  has  been  found  valuable.  Care 
must  be  used  to  see  that  the  names  of  the  articles  received  corre- 
spond exactly  with  the  classification  on  the  tools  and  fixtures 
slips,  in  order  that  no  mistakes  are  made  in  entering  these  items 
in  the  stock  account  books. 

For  following  up  these  tools  and  fixtures  orders  a  copy  of 
every  order  is  kept  in  the  storeroom  in  a  file  arranged  so 


192  STOREKEEPING 


that  each  day  goods  which  are  due  come  up.  The  department 
filling  these  orders  is  then  reminded  of  what  it  promised.  In 
cases  when  goods  cannot  be  delivered  on  schedule,  a  new  promise 
is  obtained,  and  the  department  which  is  waiting  for  the  outside 
material  is  advised  of  the  delay  and  the  new  date  of  delivery. 
This  plan  affords  accuracy  in  follow-up  methods. 

In  order  to  keep  track  of  the  orders  received  in  the  storeroom 
from  the  various  departments,  the  tools  and  fixtures  slips  are 
classified  under  five  different  heads: 

1.  Orders  for  regular  tools. 

2.  Special  tools  and  repairs. 

3.  Steel  repair  parts. 

4.  Casting  repair  parts. 

5.  Tab  cards  showing  the  dates  of  the  month. 

In  the  first  class,  regular  tools,  the  orders  are  arranged  accord- 
ing to  the  different  kinds  of  tools,  and  these  are  subdivided  into 
groups  by  tab  cards.  Special  tool  orders  are  arranged  according 
to  departments  and  these  groups  of  department  cards  are  sepa- 
rated by  tab  cards.  Kegular  repair  parts  are  grouped  in  the  file 
according  to  order  numbers.  This  order  number  is  identical 
with  the  index  number  of  the  repair  part  itself.  Orders  for 
special  repair  parts  are  filed  according  to  the  department  for 
which  they  are  made.  These  are  placed  with  the  orders  for 
special  tools. 

Promises  are  given  to  the  stores  department  as  to  the  date  on 
which  each  of  these  orders  will  be  completed;  and  this  date  is 
written  on  the  order  itself.  Besides  this,  a  slip  of  paper  is  made 
out  bearing  the  order  number  and  the  department  for  which  the 
goods  are  intended.  This  slip  is  put  behind  the  proper  date  card 
in  the  follow-up  file.  If  it  is  necessary  to  make  out  a  new  date  on 
which  the  order  will  be  finished,  this  slip  can  then  be  filed  ahead 
and  the  new  date  entered  on  the  original  order  kept  in  the  file. 

If  interruption  to  production  through  delay  in  the  delivery  of 
supplies  is  to  be  avoided,  definite  relations  must  exist  between 
orders  and  stores.  This  relation  is  maintained  by  means  of 
information  furnished  by  the  order  department  for  the  amount 
of  raw  material  used  for  each  order  issued  to  the  factory.  As 
wire,  wire  rods  and  rivets  are  the  principal  items  of  expense, 
slips  are  furnished  by  the  order  department,  which  show  the 


FORMS  AND  SYSTEMS  193 


sizes,  kinds  and  amounts  used  for  each  order  (Form  XLVIII). 

A  set  of  tab  cards,  each  marked  with  stock  sizes  of  wire  and 
rods,  are  used  for  this  purpose.  Behind  each  of  these  tabs  are 
filed  the  slips  furnished  by  the  order  department,  which  show 
the  kind  of  wire  and  the  amount  that  is  to  be  used  for  every 
order.  By  filing  these  slips  back  of  their  respective  tabs,  it  is 
possible  at  any  time  to  tell  the  amount  of  wire  necessary  to  fill 
such  orders  as  are  in  the  factory.  When  these  orders  are  com- 
pleted they  are  returned  to  the  stock  clerk,  and  the  slips  which 
have  been  filed  are  taken  out  and  destroyed,  as  the  factory  order 
is  returned  to  the  order  department  for  filing. 

To  make  this  system  for  handling  details  effective,  the  duties 
of  the  storekeeper  and  the  stock  clerk  are  classified.  To  cut  out 
unnecessary  labor  and  lost  time  in  their  respective  departments 
their  time  can  profitably  be  distributed  to  their  jobs.  Definite 
printed  instructions  are  issued  to  both  the  stock  clerk  and  the 
storekeeper. 

It  is  the  duty  of  the  storekeeper  to  see  that  the  stock  in  the 
storeroom  is  kept  in  good  order,  that  it  is  properly  arranged  and 
that  each  item  is  given  a  definite  place  so  that  it  can  be  found 
without  delays  in  the  delivery  of  articles  distributed  from  that 
department. 

By  means  of  the  depleted  stock  list,  the  storekeeper  can  closely 
follow  those  items  which  are  low  in  stock  and  those  which  are 
needed  the  most,  and  can  issue  instructions  to  the  various  depart- 
ments making  such  goods  as  are  needed  and  as  are  called  for  by 
tools  and  fixtures  orders. 

The  storekeeper  further  keeps  track  of  all  orders  for  tools  and 
fixtures  and  various  goods  made  in  the  factory  which  are  dis- 
tributed from  the  storeroom,  including  the  regular  stock  of 
repairs,  and  tools  and  special  items.  He  also  makes  out  records 
for  these  items  as  they  are  received  on  various  orders,  so  that 
they  can  be  listed  properly  in  the  books  and  a  correct  account 
made  of  what  is  delivered  to  the  storeroom.  The  regular  stores 
requisitions  are  gone  over  each  day  to  see  that  they  are  properly 
made  out.  This  is  essential  because  it  eliminates  errors  in  classi- 
fying totals  in  the  stock  account  books. 

Similarly  the  duties  of  the  stock  clerk  are  classified  and 
scheduled  so  that  he  can  perform  his  work  with  the  least  friction. 


194  STOREKEEPING 


The  first  period  of  each  morning  is  spent  in  entering  in  the  stock 
books  such  articles  as  have  been  received  in  the  factory  and 
storeroom  during  the  previous  day,  and  in  making  entries  of 
those  orders  that  have  been  made  out  for  new  stock  material. 

During  the  second  period,  entries  of  all  goods  delivered  from 
the  storeroom  are  made  in  the  books,  including  raw  material, 
repair  parts  and  other  supplies. 

On  Monday  afternoon,  records  are  made  from  the  stock  account 
books  into  the  weekly  stores  report  book,  which  show  the  amount 
of  each  stock  article  on  hand  at  the  close  of  the  preceding 
Saturday. 

On  Tuesday  afternoon,  records  are  made  against  each  article 
on  the  depleted  stock  lists  showing  the  balance  due  on  goods 
which  are  below  the  minimum  amount. 

Wednesday  afternoon  is  occupied  in  making  out  a  statement 
of  the  oil  used  by  each  department  during  the  preceding  week 
and  in  listing  it  in  standard  quantities  with  the  cost. 

Thursday  afternoon  is  devoted  to  making  out  a  complete  report 
of  all  stores  used  by  each  department  during  the  preceding  week 
so  as  to  show  the  total  expense  of  the  goods  supplied  to  the 
several  departments  by  the  storeroom. 

On  Saturday  afternoon  work  which  has  come  in  during  the 
week  is  adjusted  and  special  reports  as  they  are  asked  for  are 
made  out.  Figures  are  computed  giving  the  weekly  consumption 
of  every  stock  article. 

A  SHORT-CUT  SYSTEM  FOR  CHECKING  LEAKS 
IN  HANDLING  STORES 

A    SIMPLE  and  effective  system  for  handling  stores  with  im- 
portant variations  from  the  foregoing  plan  has  been  evolved 
by  a  manufacturer  of  brushes.    It  acts  both  as  a  check  on  leaks 
and  as  a  basis  for  distributing  general  expense. 

All  general  stores  are  kept  in  a  storeroom,  from  which  with- 
drawals are  made  only  on  the  presentation  of  the  usual  requisi- 
tion. This  card  is  sent  to  the  cost  department  after  the  supplies 
have  been  delivered.  The  head  of  the  department  for  which  the 
supplies  were  ordered  keeps  a  duplicate  copy. 

On  the  card  are  scheduled  the  date,  name  of  department 


FORMS    AND   SYSTEMS 


195 


receiving  the  supplies,  by  whom  delivered  and  received,  and  a 
space  for  clerical  checking,  in  addition  to  columns  for  quantity, 
name  of  article,  price  and  value.  Each  of  these  spaces  is 
significant. 

The  unusual  feature  about  this  little  stores  system  is  the 
foreman's  report,  which  has  been  found  very  useful.    It  is  made 


Shortage  Report                                                      Date 

Drwf, 
Ho. 

mm 

Amount 
Short 

Date 
Short 

Amount  In 
Stock 

Mnff. 

Order 

Amount  of 
(Mot 

Dent 
locatod 

Ot#t 

Ml 

" 

oductkHiM 

FORM  XLIX:    Twice  a  week,  in  an  Illinois  factory,  the  shortage  report  shownbnngs this  item  to 

the  attention  of  the  manager.     Spaces  are  left  for  the  initials  or  signatures  of  six  employees  whose 

business  it  is  to  prevent  shortage.    The  resulting  teamwork  successfully  forestalls  any  serious  lack 

of  materials  or  supplies 

out  in  the  office  and  is  sent  to  the  department  foremen  at  the 
end  of  each  month.  Thus  it  gives  each  foreman  a  chance  to  know 
with  what  he  has  been  charged. 

On  the  front  of  the  card  is  the  name  of  the  department  and 
the  month,  together  with  a  summary  in  dollars  and  cents  of  the 
direct  labor,  material,  repairs  and  supplies  which  were  charged 
to  the  department  for  the  month. 

Below  this  summary  are  figured  in  percentages,  the  rates  of 
the  current  indirect  labor  and  supplies  to  direct  labor,  together 
with  similar  percentages  for  the  preceding  month  and  for  the 
month  in  which  this  percentage  was  lowest. 

To  sum  up,  this  supply  record  gives  an  idea  of  what  the  labor, 
supply  and  material,  and  repair  expenses  of  each  department 
are.  By  this  means  only  can  an  accurate  percentage  cost  be 
found.  Also  it  makes  the  foreman  responsible  for  his  general 
expenses.  This  has  a  healthy  influence  in  checking  leaks.  If 
a  man  knows  that  his  general  expense  is  being  totaled  in  the 
office  he  will  be  more  careful  in  his  expenditures.    General  stores 


196  STOREKEEPING 


will  be  used  more  economically,  and  tools  and  supplies  will  be 
made  to  wear  longer.  Segregating  stores  also  makes  it  possible 
to  keep  a  perpetual  inventory — to  credit  and  debit  stock  as  it  is 
used. 

To  prevent  shortages  is  particularly  the  object  of  every  well- 
planned  stores  system.  The  manager  of  an  Illinois  electric 
plant  has  met  this  problem  in  a  simple  way. 

The  trouble  with  shortages  had  been  a  frequent  occurrence. 
One  day  the  foreman  of  the  assembling  department  called  the 
manager  by  telephone  and  wanted  to  know  why  the  storeroom  did 
not  deliver  some  material.  The  shortage,  he  said,  dated  back 
two  weeks  or  more.  Calling  for  the  stock  card,  the  manager 
found  the  material  quoted  as  in  stock.  When  the  storekeeper 
was  asked  if  this  were  true,  he  said  that  he  thought  so.  Investi- 
gation, however,  showed  that  the  item  was  not  in  stock  and  that 
an  order  had  never  been  placed  to  remedy  the  shortage.  No 
explanation  appeared,  other  than  neglect. 

"Within  two  days  the  same  assembling  foreman  called  for  an- 
other item.  Again  there  was  a  shortage  which  the  stock  card 
did  not  show.  As  the  item  had  been  short  over  two  weeks  and 
an  order  had  been  placed,  it  was  apparent  that  the  follow-up 
was  at  fault.  On  investigation,  it  was  found  that  the  item,  after 
the  first  notice  on  the  day  of  the  shortage,  had  been  completely 
forgotten. 

At  this  point  the  manager  determined  to  put  a  check  upon  all 
shortages  and  their  follow-up.  He  would  want  to  know  the  date 
of  shortage,  piece  number,  name  and  quantity  short.  In  order 
to  get  action  on  the  report,  he  would  need  to  know  whether  the 
parts  were  in  stock  and  not  delivered  from  the  storeroom; 
whether  a  manufacturing  order  had  been  placed  to  remedy  the 
shortage,  and  if  so,  its  schedule,  so  that  he  could  telephone  the 
proper  department  regarding  its  completion.  These  points  were 
accordingly  embodied  in  a  handy  report  (Form  XLIX). 

Every  Monday  and  Thursday  the  storekeeper  makes  out  this 
report,  filling  in  the  drawing  number,  name,  amount  of  shortage 
and  date  short.  The  report  must  include  every  actual  shortage 
in  the  storeroom.  Next  in  line  the  record  clerk  checks  these 
shortages  with  his  stock  cards,  indicating  any  disagreement.  An 
unrecorded  shortage  looks  bad  for  the  storekeeper. 


FORMS  AND  SYSTEMS 197 

As  the  report  passes  to  the  order  clerk,  he  fills  in  the  order 
number  and  quantity  covering  the  manufacture  to  replenish  each 
shortage.  The  tracing  clerk  then  takes  the  report  and  locates 
the  material  in  process,  indicating  the  department  occupied  with 
it  and  the  amount  available.  Finally,  the  report  comes  to  the 
manager,  with  all  the  information  he  needs  to  rush  the  material 
forward  by  telephone. 

Under  this  plan  everyone  concerned  goes  on  record  before  the 
manager  regularly.  As  anything  that  is  in  error  comes  directly 
to  the  attention  of  the  chief,  the  storekeeper  watches  shortages 
persistently.  The  production  clerk  feels  that  to  have  an  item 
appear  on  this  report  more  than  once  seriously  reflects  on  his 
ability  to  watch  the  stock.  The  record  clerk  is  more  careful  of 
his  entries  and  calculations.  The  order  clerk  does  not  want  to 
be  found  with  a  shortage  not  covered  by  a  manufacturing  order. 
The  tracing  clerk  dislikes  to  go  on  record  as  behindhand  or  in 
error.  Finally,  the  production  manager  feels  responsible  for  a 
clean  bill  in  all  of  his  departments.  A  moral  force  is  exerted  to 
keep  the  report  favorable  all  the  time. 


XIX 

HOW  INVENTORIES 
ARE  HANDLED  IN  TEN  PLANTS 


INVENTORY  means  overtime  and  wasted  effort  in  the  average 
factory.  The  responsibility  for  the  work  is  given  to  one  man 
who  gets  the  job  out  as  best  he  can;  the  bookkeeper  works 
overtime  trying  to  adjust  a  complicated  array  of  facts  and  figures 
to  fit  a  price  list;  men  are  laid  off  in  the  manufacturing  depart- 
ments for  a  period,  and  when  the  checking  is  finished  there 
is  still  a  liability  of  error. 

To  simplify  matters,  to  record  all  material  quickly  and  ac- 
curately, and  to  keep  the  workmen  in  the  production  departments 
idle  a  minimum  time,  one  machine  company  instituted  the  fol- 
lowing method : 

The  principal  feature  is  that  in  arriving  at  the  final  result, 
nothing  has  to  be  copied;  nothing  is  put  down  a  second  time. 
This  eliminates  many  chances  for  errors.  The  grand  total  value, 
which  is  the  figure  wanted  regardless  of  detail — detail  can  wait — 
is  obtained  at  the  earliest  possible  moment.  Since  cards  and  loose 
sheets  are  used,  the  work  can  be  distributed  among  many  clerks 
and  a  number  of  adding  machines  can  be  used. 

Each  job  is  specialized.  One  man  prices;  one  man  checks 
prices;  a  number  of  men  extend  by  hand;  and  one  man  checks 
the  extensions  with  a  calculating  machine.  In  pricing  and  check- 
ing extensions,  a  great  deal  of  time  is  saved  by  having  the 
inventory  tags  sorted  by  commodities.  The  sorting  must  be  made 
eventually;  it  had  better  be  done  the  very  first  thing.  There  is 
nothing  complicated  about  any  of  this  work.  It  is  simple ;  and 
yet  everything  which  can  be  used  is  recorded. 

Organization  is  essential;  everything  is  planned  beforehand 


In  maintaining  a  perpetual  inventory,  records  are  ordinarily  kept  close  to  materials  and  supplies. 

Card  files  are  placed  for  easy  reference  in  the  stores  department  shown  at  the  top.    Under  each  bin 

is  a  slide  for  cards.     It  has  a  rough  surface  so  that  it  can  be  chalked.     Below,  in  a  tool  and  supply 

vault,  steel  cabinets  are  used  for  safekeeping  of  the  records  of  the  cost  department 


HOW  TO  HANDLE   INVENTORIES 


201 


in  readiness  for  inventorying.  Each  foreman  is  given  a  chart 
of  the  personnel  so  that  he  may  know  whom  to  call  upon  for 
assistance.  He  turns  in  the  names  of  the  workmen  who  will  help 
him  to  the  office  manager,  who  criticises  the  number  of  men 
wanted,  their  rates  of  pay  for  the  work,  and  so  on. 


CT) 

TAO  WO.     / 

^             19        INVENTORY  TAG 

CATALOGUE     NUMBER. 

LETTER- 

-2- 

3 

CALCULATIONS 

QUAN1 

ITY 

price 

pen 

VALUE 

UNIT 

AMOUNT 

S4f 

r»o«     /Z 

pieces 

SLO 

ar 

*f? 

_z%_ 

TAPr       /<f 

a./ 

WT.  Pen  Pircr  /(fi 

reeT 
2.3 

2.2 

Z¥ 

LAMB 

:?<? 

too 

KIECES 

a- 

tJCTENDtD  BY.  ."$ .% 

ft.  tm       All  CAA0A  no Jt  *t  ACC 

ountid  ron 

FORM  L:    In  order  to  prevent  inaccuracies  and  omissions,  the  management  issues  a  set .of  instruc- 
tions numbered  to  correspond  exactly  with  the  numbering  ol  the  spaces  as  shown.     What  is  to 
be  written  into  each  space  is  explained  in  complete  detail.    A  specimen  card,  of  course,  is  attached 
to  each  copy  of  the  instructions 

To  facilitate  the  work,  the  office  manager  has  three  representa- 
tives to  look  after  the  detail  of  the  work  in  the  factory : 

Head  Storekeeper— Raw  Materials. 

Production  Man— Work  in  Process. 

Stock  Record  Man— Finished  Machines,  Attachments  and  Re- 
pair Parts. 

They  see  that  the  inventory  is  made  according  to  the  instruc- 
tions which  the  general  superintendent  issues  to  every  foreman 
two  weeks  before  the  beginning  of  the  listing.  Any  matters 
about  which  there  is  question  are  taken  up  with  the  office  repre- 
sentatives and,  if  necessary,  they  refer  the  matter  to  the  office 
manager  for  his  decision. 

Each  foreman  is  held  strictly  responsible  for  the  accuracy 
of  the  work  in  his  department,  and  is  required  to  sign  and  send 


202  STOREKEEPING 


in  with  the  inventory  tags  a  certificate  in  the  following  terms : 

"I  hereby  certify  that  the  inventory  of  machines  and  parts 
thereof,  finished  and  in  process,  and  all  merchandise,  materials 

and  supplies  on  hand  in  the Department  No as  shown 

on  tags  No to ,  has  been  carefully  and  accurately  taken 

by  actual  count,  weight,  or  measurement,  and  that  all  obsolete, 
damaged,  or  depreciated  items  are  specially  noted." 

The  inventory  tags  (Form  L)  are  charged  by  numbers  to  the 
department  to  which  they  are  issued.  Every  tag  given  out  must 
be  accounted  for  when  the  inventory  has  been  completed  and  the 
tags  turned  in  with  the  certificate.  If,  for  any  reason,  a  tag  has 
been  spoiled,  a  notation  to  that  effect  is  made  and  both  the 
original  and  duplicate  are  sent  to  the  office  with  the  balance 
of  the  inventory  tags,  all  of  which  are  sorted  in  regular  numerical 
order  (small  numbers  on  top). 

All  articles  which  during  the  season  are  regularly  procured 
from  the  storeroom  are  sorted  and  counted  by  the  different  fore- 
men; and  the  count  (on  a  regular  shipping  tag)  attached  to 
the  boxes  or  other  receptacles  containing  the  articles  is  sent  to 
the  general  stores  department  to  be  included  in  the  stores 
inventory. 

The  inventory  is  taken  by  actual  count,  weight  or  measure- 
ment, or  weight  and  count,  as  the  commodity  may  demand. 
"Where  weighing  or  counting  is  not  practicable,  estimates  are 
made,  but  only  by  written  permission  of  the  office  manager,  and 
in  the  presence  of  him  or  one  of  his  office  representatives. 

In  recording  raw  materials  and  supplies  great  care  is  taken 
that  the  trade  unit  of  measure  is  used  in  showing  quantities  on 
hand.  To  secure  the  correct  labor  value  of  all  work  in  progress, 
the  catalog  number,  name  of  each  part,  and  the  last  operation 
performed  are  listed,  and  in  unfinished  work,  where  operations 
have  been  performed  out  of  the  regular  order,  all  operations 
which  have  been  performed  must  be  shown.  On  the  other  hand 
finished  machines  and  attachments  are  reported  by  the  number 
which  they  bear.  Finished  attachments  in  the  warehouses  which 
are  in  a  ' '  knocked  down ' '  state  are  noted  by  the  assembled  part 
numbers  and  names  according  to  the  material  lists.  Attachments 
already  packed  are  inventoried  by  the  shipping  package  name 
and  number  (Forms  LI-LIV). 


HOW  TO  HANDLE   INVENTORIES 


203 


In  sorting  and  counting,  old  stock  is  placed  in  such  a  way 
that  it  will  be  used  up  at  the  beginning  of  the  next  season. 
Merchandise,  materials  and  supplies  which  are  unsalable  or  dam- 
aged, or  have  depreciated  in  value,  are  so  designated  on  the 
inventory  tag.  The  approximate  per  cent  of  depreciation  is  also 
stated.  As  far  as  possible,  disposition  is  made  before  inventory, 
of  all  obsolete  material  or  machine  parts.  Any  such  stock  which 
may  remain  must  be  fully  described  on  inventory  tags  so  that 
it  will  be  cleared  shortly. 

Special  attention  is  paid  to  all  stock  located  on  platforms, 
bridges  and  other  places  outside  of  buildings,  in  order  that 


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FORMS  LI-LIV:      These  sheets,  which  are  distributed  among  the  clerks,  make  inventory  taking 

a  matter  of  days  instead  of  weeks.       By  separating  the  materials  or  work  handled,  plans   can  be 

mapped  out  for  four  distinct  departments 

omissions  or  duplications  may  not  occur  through  misunder- 
standing as  to  ownership.  Foremen  of  adjoining  departments 
confer  regarding  such  material,  and  in  the  presence  of  one  of 
the  office  representatives  decide  who  will  inventory  the  material 
in  question. 


204 


STOREKEEPING 


While  inventory  is  being  taken,  no  stock  is  moved  in  a  depart- 
ment except  upon  the  written  approval  of  the  office  manager. 
Stock,  however,  may  be  transferred  between  two  departments 
prior  to  the  taking  of  either  of  their  inventories,  or  after  both 


INVENTORY  PLAN  OF 
ORGANIZATION -1914 


CHALMERS  MOTOR  CO. 
DETROIT  MICH. 


MISCELLANEOUS 


W.  G.SHEARAR 


nicmcu.  STANSELL 


T001II00M    NUTTING 
ntuPKss  PURSE 


FOURTH  FLOOR 


FIGURE  X: 
tion  chart  such 


To  define  clearly  the  duties  of  everyone  engaged  in  taking  inventory,  an  organiza 
as  that  shown  above  is  prepared  each  year.     Blueprint  copies  of  this  are  distributed 
well  in  advance  of  the  inventory  date  to  all  concerned 


have  been  completed.  The  shipping  and  repair  departments 
arrange  beforehand  for  all  stock  likely  to  be  required  during 
the  inventory  period,  which  is  ordinarily  two  weeks. 

All  material  received  at  the  works  after  the  listing  has  begun, 
even  though  previously  invoiced,  is  not  included  in  the  season's 
inventory  but  is  stamped,  "Not  Inventoried."  All  material 
received  at  the  works  prior  to  inventory  date,  however,  is  in- 


HOW  TO  HANDLE   INVENTORIES 


205 


eluded  in  the  inventory,  and  the  invoices  for  such  material  are 
stamped,  "Inventoried."  Any  material  received  prior  to  the 
date  of  inventory,  but  not  unloaded,  is  included  in  the  inventory. 

All  shipments  of  machines,  repair  parts  and  materials,  sub- 
sequent to  the  date  of  inventory  and  prior  to  the  completion 
thereof,  are,  of  course,  included  in  the  inventory. 

Tags  are  attached  to  all  objects  as  inventoried.  No  tags  are 
removed  until  everything  in  a  room  has  been  considered.  The 
inventory  tag  is  in  duplicate.    The  department  foreman  and  the 


O 

INVENTORY  1914 


N?   11852 


O 

INVENTORY  1914. 

N?   11852 


INVENTORY  1914 


DESCRIPTION. 


COST. 


REMARKS 


STOCK  TAKEN  BY. 
CHECKED  BY 


NO  14850 
CHALMERS  MOTOR  COMPANY 

PROCESS  INVENTORY  1914 


BL0G.N0.. 
DEPT.  NO.. 


ORDER  OR  CAR  NO.. 
QUANTITY 


REMARKS 


STOCK  TAKEN  BY_ 
COST 


FORMS  LV  and  LVI:    Two  weeks  in  advance  of  the  inventory,  clerks  attach  triplicate  tags  (shown 

at  left)  to  all  stationary  stock    At  that  time  the  description  is  filled  in,  on  the  uppermost  ticket  only. 

The  duplicate  and  triplicate  are  used  on  inventory  day.     For  goods_  in  process  the  manila  tag  at 

the  right  is  used.    It  is  attached  the  day  previous  to  inventory 


office  representative,  before  collecting  a  single  tag,  make  a  very 
careful  trip  through  the  department  to  make  sure  that  everything 
which  should  be  inventoried  in  the  department  has  an  inventory 
tag  on  it.     Together  they  collect  the  inventory  tags,  leaving, 


206  STOREKEEPING 


if  they  so  desire,  the  original  or  blue  tag  attached  to  the  stock. 
The  card  (white  part  of  tag)  is  sent  to  the  cost  department. 
They  check  the  description,  catalog  number,  quantity,  and  so 
on,  to  the  best  of  their  ability.  After  the  tags  have  been  col- 
lected they  are  arranged  in  numerical  order  with  small  numbers 
on  top,  including  all  of  the  tags  which  may  have  been  marked 
1 '  void ' '  or  ' '  spoiled. ' '    The  last  tag  is  plainly  marked, ' '  Last  tag 

No.  ,"  showing  the  number  of  the  last  tag  used.     All  the 

tags  delivered  to  the  department,  including  unused  tags,  are 
sent  to  the  cost  department  with  the  certificate. 

After  the  tags  have  been  returned  to  the  office  and  all  the 
numbers  accounted  for,  they  are  sent  to  the  printers  and  cut 
at  the  dotted  line.  The  blue  part  is  returned  to  the  shop  for 
the  files  and  the  cards,  which  are  then  standard  size,  five  inches 
by  eight  inches,  are  returned  to  the  cost  department. 

Commodities  are  sorted  first  and  then  priced.  As  soon  as 
they  are  extended  and  checked,  the  amounts  are  listed  with  an 
adding  machine,  making  sub-totals  for  the  various  kinds,  sizes 
or  classes  of  each  commodity.  A  recapitulation  of  these  totals  is 
then  made  according  to  the  various  accounts  carried  in  the  stores 
ledger. 

After  the  grand  total  value  of  the  inventory  is  ascertained, 
the  balance  of  the  information  required  on  the  summary  sheets 
is  filled  in  from  the  cards  with  ink.  The  sheets  are  then  arranged 
in  proper  order  and  sent  to  the  printer  to  be  bound  with  a  light 
cover  and  stapled.  The  cards  are  filed  away  in  the  vault  in  the 
place  previously  occupied  by  the  cards  of  the  second  preceding 
year. 

HOW  ONE  COMPANY  SAVED  TEN  DAYS 
IN  TAKING  AN  INVENTORY 

T^WO  weeks  was  required  for  this  inventory.    Methods  of  inven- 
tory, however,  vary  as  widely  as  factory  conditions.    The  less 
the  time  for  inventory,  the  less  will  be  the  contingent  interrup- 
tion to  production  and  the  overhead  per  unit  of  output. 

Two  years  ago  a  manufacturing  plant  in  Cleveland  was  shut 
down  for  a  fortnight  while  its  employees  were  taking  the 
annual  stock  inventory.    Last  year  the  same  force  of  laborers 


^ HOW  TO  HANDLE  INVENTORIES 207 

with  the  assistance  of  an  appraisal  company  did  the  same  work 
in  four  days.  With  the  expenditure  of  less  than  two  hundred 
dollars  the  manufacturing  company  was  able  to  make  a  saving 
of  ten  days.  The  appraisal  company  was  represented  in  the 
plant  by  just  one  man  and  the  actual  work  was  done  by  the  same 
employees  who  had  handled  it  the  year  previous.  A  comparison 
of  the  methods  used  in  the  two  years  will  explain,  however,  the 
great  difference  in  time. 

That  the  foreman  of  each  department  and  the  men  under  him 
best  knew  the  material  in  that  department  was  the  belief  of 
the  company.  They  believed,  therefore,  that  the  foreman 
was  best  suited  to  take  the  complete  inventory  of  his  department. 
The  appraisal  company  thought  differently;  it  divided  the  work 
so  that  the  foreman  of  a  certain  department,  such  as  the  press- 
room, went  through  the  entire  plant  with  a  selected  group  of 
men,  taking  his  own  special  line  and  nothing  else. 

After  all  the  material  was  listed,  it  was  checked  by  the 
appraiser  and  the  foreman  of  the  department  in  which  it  was 
found.  It  was  then  priced  but  by  a  new  method.  A  schedule 
of  all  the  different  parts  used  in  making  up  the  manufactured 
product  was  prepared.  From  the  company's  cost  records  a 
schedule  of  each  different  operation  in  the  manufacture  of  each 
part  was  drawn  up.  The  use  of  these  figures  did  away  with  the 
possibility  of  wrong  or  inconsistent  prices  such  as  were  found 
in  the  inventories  of  previous  years. 

Above  all,  inventory  should  be  thorough  and  taken  in  the 
minimum  possible  time.  The  Chalmers  Motor  Company  inven- 
tory meets  these  requirements  by  methods  which  differ  from  those 
previously  discussed  (Figure  X).  Factory  operation  is  inter- 
rupted ordinarily  for  inventory  only  one  day.  If  the  date  falls 
on  Sunday  or  a  holiday,  work  is  not  suspended  at  all.  The 
one-day  inventory  has  been  made  possible  by  thorough  prepara- 
tion. Two  weeks  before  the  actual  listing  and  counting,  clerks 
begin  the  tagging  of  all  stationary  stock.  The  inventory  tag 
(Form  LV)  is  in  triplicate.  The  clerks  fill  in  a  description  of 
the  stock  on  the  uppermost  (yellow)  ticket.  This  is  then  detached 
and  sent  to  the  office,  where  it  is  priced  by  the  cost  department. 
The  pink  duplicate  and  manila  triplicate  are  not  removed  until 
the  day  of  the  inventory. 


208  STOREKEEPING 


The  first  step  then  is  to  ascertain  and  fill  in  the  actual  quan- 
tities on  the  pink  slips.  As  soon  as  these  are  entered,  the  slips 
are  detached  and  returned  to  the  office.  The  accounting  force 
now  matches  them  with  the  yellow  slips  previously  sent  in, 
enters  on  the  yellow  slips  the  quantity  as  designated  on  the 
pink  slips,  and  posts  the  pricings  from  the  former  to  the  latter. 
Thus  two  complete  sets  of  inventory  slips  are  obtained.  These 
are  arranged  numerically  in  blocks  of  five  hundred  and  turned 
over  to  independent  groups  of  calculating  machine  operators  to 
extend.  Subsequently,  clerks  with  adding  machines  find  the 
totals.  The  two  sets  are  next  proved  against  each  other  and  must 
agree  absolutely.  If  any  discrepancies  appear,  the  figures  are 
gone  over  until  the  errors  are  found. 

The  triplicate  tag,  which  is  a  manila  card,  remains  on  the 
article  until  the  person  responsible  for  the  inventory  in  each 
department  has  passed  through  and  satisfied  himself  that  every 
item  of  stock  has  been  tagged.  But  this  final  tag  is  not  removed 
until  all  numbers  have  been  accounted  for. 

For  record  purposes  the  yellow  slips  are  transcribed  on  larger 
sheets  of  paper.  These  are  checked  carefully  against  the  orig- 
inals, but  they  are  extended  and  totaled  separately  in  the  same 
blocks  of  five  hundred  numbers.  The  accuracy  of  the  copying 
thus  is  attested  and  a  third  check  furnished  on  the  mathematical 
work. 

In  case  of  goods  in  process,  a  tough  manila  tag,  instead  of  the 
weaker  triplicate  tag,  is  employed  (Form  LVI).  The  tagging 
begins  the  day  before  the  inventory.  The  next  day  in  listing  this 
stock,  the  part  symbol,  order  or  (motor)  car  number,  quantity, 
description  and  last  operation  performed  on  the  stock  are  indi- 
cated. If  the  stock  is  damaged  or  imperfect,  its  condition  is  also 
noted. 

After  the  tags  have  been  inspected  by  the  head,  they  are 
removed  and  returned  to  the  office.  Here  they  are  checked 
against  the  manufacturing  orders  issued  and  in  process,  then 
priced,  extended,  totaled  and  transcribed  on  the  large  second 
sheets,  as  are  the  stock  slips. 

These  sheets  are  finally  bound  in  leather  covers  and  kept  handy 
for  the  manager.  For  several  months  afterwards  he  finds  in  the 
facts  recorded  a  potent  leverage  on  the  production  department 


HOW  TO   HANDLE   INVENTORIES 


209 


to  reduce  any  surplus  not  merely  of  standard  parts,  but  espe- 
cially of  stock  on  old  models. 

Only  goods  in  process  are  actually  counted  under  this  routine. 
A  perpetual  inventory  is  maintained  on  all  material  in  the  stock- 
rooms, both  by  bin  tags  and  by  an  office  record.  These  are  com- 
pared frequently,  and  any  discrepancies  are  at  once  reconciled. 
Whenever  an  article  reaches  its  low  limit,  the  storekeeper  makes 
an  actual  count  and  reports  his  finding  to  the  office.  Any  adjust- 
ments in  the  records  are  made  then  and  there.  Thus,  in  fact,  the 
physical  inventory  of  material  in  the  stock-rooms  is  in  progress 
daily  throughout  the  year. 

So  accurate  have  the  records  been  found  that  the  supervising 
auditor  of  inventory  is  willing  to  accept  their  witness  as  suffi- 
cient. 

At  the  Elgin  Watch  Company,  where  a  similar  inventory  plan 
is  followed,  out  of  fifty  bin  tags  selected  at  random  not  one  was 
off  on  the  tally.  Considering  the  small  bulk  of  many  parts 
handled,  this  was  a  remarkable  showing.  The  auditor's  repre- 
sentative, after  making  this  test,  turned  and  said:  ''We  don't 
need  to  go  any  further.  I  'm  willing  to  take  your  paper  record 
for  this  part  of  the  inventory." 

To  have  gone  into  an  actual  physical  count  of  the  millions  of 
small  parts  in  stock  alone  would,  in  this  case,  have  required  many 
days.  Reliable  perpetual  inventory  records  of  material  in  store- 
rooms, however,  leave  it  necessary  only  for  the  stock  on  the  floor 
to  be  counted.  Consequently  the  time  out  for  actual  inventory- 
ing is  reduced  to  a  minimum. 

It  is  possible  even  to  dispense  with  the  yearly  physical  inven- 
tory of  goods  in  process  by  operating  proper  running  records  of 
production.  Bulk  materials  as  flour,  pig  iron,  cement,  coal, 
wood  alcohol,  paint,  varnish,  and  oil,  readily  lend  themselves  to 
such  accounting,  as  they  permit  of  a  daily  labor  and  material 
cost.  So  also  do  single  piece  products  where  the  operations  are 
few  and  clearly  distinguished.  Assembled  products  involving 
many  small  parts,  like  automobiles,  typewriters,  clocks  and 
watches,  are  not  so  easily  handled,  as  the  clerical  work  of  operat- 
ing the  perpetual  inventories  covering  the  work  in  all  its  stages 
would  be  enormous  and  the  chances  for  inaccuracies  are  great. 
Indeed,  it  is  a  question  whether  the  cost  of  the  clerical  work 


210  STOREKEEPING 


would  not  exceed  the  gain,  especially  when  by  keeping  an  accur- 
ate perpetual  inventory  on  stocked  parts  and  by  making  proper 
preparations  for  the  goods-in-process  inventory,  the  latter  opera- 
tions can  be  reduced  to  a  single  day,  as  at  the  Chalmers  plant. 

MAKING  EACH  FOREMAN  RESPONSIBLE  FOR 
THE  CONTENTS  OF  HIS  SHOP 

A  PLACE  for  everything  and  everything  in  its  place  simplifies 
■**'  inventory.  This  is  the  basis  of  the  procedure  at  the  Lidger- 
wood  Manufacturing  Company's  plant.  Each  foreman  is 
responsible  for  the  inventory  of  the  contents  of  his  shop, 
including  tools,  fixtures,  and  appliances  of  all  kinds,  as  well  as 
finished  and  unfinished  work. 

Small  blank  books  with  ruled  lines  are  prepared.  Each  book 
has  a  number  and  contains  the  name  of  the  foreman,  the  date 
of  the  inventory  and  a  few  explicit  instructions  as  to  exactly 
what  detail  is  to  go  into  that  particular  book.  These  instruc- 
tions are  typewritten  on  colored  paper  and  pasted  on  the  outside 
of  the  book. 

The  foreman  selects  competent  men  and  assigns  them  to  definite 
things.  For  instance,  one  man  goes  through  the  work-bench 
drawers  and  inventories  their  contents — hammers,  chisels,  files, 
bench  brushes,  and  so  on — which  are  the  company's  property. 
One  or  more  men  are  assigned  to  inventorying  all  the  rough 
castings,  another  inventories  all  of  the  partly  finished  work,  and 
another  the  finished  work. 

These  books  are  written  up  by  some  one  under  that  particular 
foreman  and  come  in  to  the  superintendent.  The  superintendent 
looks  them  over  and  portions  them  out  to  different  clerks  who  in 
turn  copy  the  items  with  their  respective  values  in  other  books 
which  go  to  the  New  York  office. 

Perpetual  inventories  are  used  for  keeping  track  of  machine 
tools,  jigs,  fixtures  and  the  like,  so  that  the  books  simply  carry 
the  numbers  of  discarded  tools  or  additional  tools.  Jigs  and 
fixtures  are  all  made  to  a  certain  series  of  order  numbers  so 
that  the  exact  cost  of  each  item  as  made  may  be  had.  A  perma- 
nent inventory  of  the  various  systems  of  piping  and  wiring 
is  also  kept  and  the  changes  each  year  are  simply  noted  as 
additions  or  subtractions. 


HOW  TO   HANDLE   INVENTORIES 


211 


At  the  Studebaker  Manufacturing  Company's  plant  cards 
(Forms  LVII-LIX)  have  been  especially  devised  as  the  most 
satisfactory  way  to  take  the  inventory.  These  cards  are  ar- 
ranged (says  the  purchasing  agent)  so  that  we  make  our  inven- 
tory in  duplicate  by  the  use  of  carbon-backed  paper.    Both  the 


FORMS  LVH-LIX:      These  forms  are  made  out  in  duplicate,  and  are  used  for  classifying  and 

checking  raw  material,  finished  stock  and  goods  in  process.     By  making  the  records  in  duplicate, 

one  copy  can  be  used  for  pricing,  while  the  other  is  used  in  summarizing  total  quantities 

original  and  duplicate  are  numbered  the  same.  The  duplicate 
enables  us  to  forward  two  divisions  of  our  work  at  the  same  time. 
One  copy  is  sorted  as  to  quantity  and  size  while  the  other  copy 
goes  to  the  purchasing  department  to  be  priced. 

Before  starting  an  inventory  we  take  our  factory  insurance 
maps  and  lay  out  the  territory  to  be  inventoried  along  insurance 
lines.  Each  building  and  each  floor  in  each  building  is  a  separate 
division  and  is  inventoried  according  to  its  building  and  floor 
number.  In  this  same  manner  we  lay  off  the  courts  between 
the  buildings  and  our  lumber  yards,  and  the  person  who  will 
be  responsible  for  inventorying  each  division  is  notified  in  writing 
and  is  supplied  with  the  necessary  cards. 

Everything  in  the  inventory  division  is  counted  twice  and 
then  checked  by  the  person  who  is  responsible  for  the  inventory 
in  the  division.  The  first  counter  takes  the  inventory  card  and 
counting  the  material  or  weighing  it  as  the  case  may  be,  marks 
the  inventory  card  and  leaves  it  with  the  material.    The  second 


212  STOREKEEPING 


counter  follows  him  as  closely  as  possible,  counts  the  work 
a  second  time  and  marks  his  result  on  the  ticket  and  turns  it 
over  to  the  man  who  does  the  checking.  If  there  is  any  difference 
between  the  two  counts  the  checker  should  catch  it.  If  he  does 
not,  another  count  is  called  for  when  the  cards  are  turned  into 
the  office. 

This  company  keeps  a  perpetual  inventory  of  all  of  the  plant 
equipment  accounts  as  well  as  the  finished  stock  and  the  store- 
room accounts.  Whenever  the  stocks  run  low  in  any  one  of 
these  items,  the  balance  on  hand  is  inventoried  and  proved  with 
the  records.  It  is  sometimes  necessary  to  make  adjustments 
due  to  clerical  errors,  but  as  a  whole  the  plan  has  proved 
feasible  and  satisfactory. 

Two  methods  of  keeping  a  perpetual  inventory  are  in  general 
use.  One  provides  for  the  posting  of  receipts  and  disburse- 
ment orders  on  the  respective  stock  cards  by  men  who  have  no 
other  duty  than  carrying  out  the  balance;  the  other  for  the 
recording  of  receipts  and  disbursements  on  "in"  and  "out" 
cards  tacked  to  each  bin  or  lot  of  stock.  The  former  is  preferable 
chiefly  because  errors  are  less  likely  to  occur  when  the  task  of 
posting  the  movements  of  stock  and  supplies  is  specialized.  The 
stockman,  both  a  clerk  and  a  laborer  under  the  "in"  and  "out" 
card  system,  often  neglects  the  posting,  especially  when  con- 
fronted with  many  in-shipments  and  disbursements.  Moreover, 
this  method  presents  complications  in  that  it  is  not  always  pos- 
sible to  cover  all  the  supplies  and  materials  of  one  kind  by  a 
single  tag.  Many  plants,  on  the  other  hand,  operate  both  kinds, 
deeming  the  office  record  indispensable  and  the  bin  tags  of  suf- 
ficient value  in  addition  to  warrant  the  duplicated  clerical  work. 
The  fact,  too,  that  an  independent  record  is  maintained  in  the 
office  serves  to  make  the  storekeeper  more  attentive  to  his  tags. 

A  properly  kept  perpetual  inventory  record  makes  unnecessary 
the  taking  of  stock  in  the  ordinary  way.  But  it  is  well  to  check 
up  by  an  actual  inventory  until  you  are  satisfied  that  the  per- 
petual record  is  dependable.  Even  then  it  is  on  the  side  of 
safety  to  make  a  complete  physical  count  of  some  section  of  the 
stock-room  every  two  or  three  years,  and  every  year  to  check  up 
a  few  bins  or  shelves  here  and  there.  The  fact  that  you  will  do 
this  has  a  wholesome  moral  effect  on  both  the  storekeeper  and  the 
record  clerk. 


HOW  TO   HANDLE   INVENTORIES 213 

Viewed  correctly,  a  perpetual  inventory  is  after  all  only  a 
device  for  spreading  the  physical  count  over  the  entire  year  on 
as  much  of  the  material  as  practicable.  This  permits  the  job  to 
be  specialized,  which  promotes  efficiency  and  makes  it  un- 
necessary to  break  in  on  the  time  of  the  shop.  Virtually  all 
plants  that  operate  such  records  have  a  more  or  less  systematic 
plan  of  checking.  Some  have  the  storekeeper  make  a  physical 
count  whenever  an  item  reaches  its  minimum.  Others,  notably 
the  Jos.  T.  Ryerson  &  Son  Company  have  a  man  from  the  office 
go  through  a  definite  list  of  items  each  day,  so  scheduled  that 
the  entire  stock  will  be  covered  by  inventory  time.  A  large  New 
York  electrical  company  has  gone  even  further.  All  its  store- 
room material  is  divided  into  classes.  Thus,  mining  and  under- 
ground supplies  are  classes  one  to  ten ;  and  arc  lamp  parts,  in- 
candescent lamp  and  light  hardware  are  classes  eleven  to  twenty- 
five.  Definite  dates  are  then  set  upon  which  material  in  certain 
classes  will  be  checked.  For  instance,  on  February  28th  material 
in  classes  one  to  twenty  is  taken ;  on  April  30th,  in  classes  twenty- 
one  to  twenty-nine;  and  on  May  31st,  classes  twenty-two  to 
twenty-five.  Thus  by  the  end  of  the  year,  every  class  of  material 
will  have  been  counted  and  checked  against  the  stock  ledger 
balances. 

Inventory,  it  should  never  be  forgotten,  offers  opportunities 
to  reduce  stock  in  excess  of  that  actually  required  for  the  most 
efficient  and  economical  conduct  of  business.  The  inventory, 
however,  must  be  thorough.  It  will  show  the  approximate  age 
of  each  item  and  the  consumption  during,  say,  the  past  year,  or 
running  farther  back  if  available,  as  well  as  the  amount  and 
value  on  hand.  Even  with  as  thorough  an  inventory  as  it  was 
possible  to  obtain  through  the  departments  ordinarily  attending 
to  such  matters,  one  concern  found  that  a  great  many  items 
were  either  omitted,  or  so  inaccurately  described,  that  it  was 
necessary  to  go  through  the  factory  and  storerooms  to  complete 
the  records  for  this  work. 

As  the  plan  worked  out  in  this  factory  such  stock  was  then 
listed  according  to  types  and  sizes  of  apparatus — in  fact,  no  stock 
was  disposed  of  without  first  determining  the  use  for  which  it 
was  intended.  This  rule  was  found  wise,  for  parts  and  raw 
material  readily  lose  their  identity  as  they  become  obsolete  or 


214  STOREKEEPING 


inactive,  and  because  of  changes  in  description  and  in  methods 
of  stockkeeping.  Attention  was  then  directed  to  the  disposition, 
as  economically  as  possible,  of  the  large  overstock.  At  the  same 
time,  however,  careful  study  was  made  as  to  the  causes  producing 
such  overstock  so  that  arguments  for  preventing  future  accumu- 
lations so  far  as  practicable  might  thereafter  govern. 

It  might  be  supposed  that  by  setting  proper  high  and  low 
limits  any  large  surplus  would  be  rendered  unlikely.  Such  is 
the  case  with  factories  like  the  Ford  plant,  which  operate  con- 
tinuously on  one  product.  Also  by  guarding  against  important 
changes  in  the  design  from  year  to  year,  any  large  stock  of  obso- 
lescent parts  is  avoided.  Ford's  policy,  therefore,  has  saved  him 
thousands  of  dollars  on  his  inventory.  With  the  same  end  in 
view,  the  H.  H.  Franklin  Manufacturing  Company  adhere  rigor- 
ously to  the  schedule  laid  out  at  the  beginning  of  the  year,  and 
if  the  engineering  department  makes  any  changes  in  mid-season, 
the  loss  involved  is  charged  against  that  department. 

In  the  average  factory  making  to  stock,  however,  the  schedule 
must  be  continually  readjusted  to  suit  the  shifting  currents  of 
demand,  and  the  high  and  low  limits  set  today  may  have  to  be 
altered  radically  tomorrow.  Hence,  the  management  cannot 
exercise  the  same  close  control  over  the  quantities  of  stock  on 
hand  and  must  depend  more  or  less  on  the  discretion  of  the  pro- 
duction clerks.  At  the  Detroit  Lubricator  Company's  plant  the 
clerks  are  graded  on  their  ability  to  keep  down  an  overstock 
and  avoid  getting  caught  with  a  large  supply  of  obsolete  parts  on 
hand.  Failure  to  sustain  a  creditable  showing  is  penalized  by 
loss  of  position.  At  the  Northway  Motors  and  Manufacturing 
Company,  the  clerks  in  charge  of  the  production  of  stock  parts 
are  paid  a  bonus  in  addition  to  their  salaries  for  improving  on 
the  previous  year's  showing  at  inventory  time.  Their  wits  are 
thus  sharpened  throughout  the  year  to  avoid  any  over-produc- 
tion and  the  result  has  been  an  increasingly  tight  inventory,  net- 
ting the  company  a  large  financial  saving. 

Inventory  valuations  present  a  problem  which  has  been  met 
in  various  ways.  To  get  back  to  the  correct  principle  it 
is  advisable  to  note  that  manufacturers  secure  profits  or  incur 
losses  from  two  sources — manufacturing  and  speculative. 

Manufacturing  profit  or  loss  is  taken  only  after  all  of  a  series 


HOW  TO  HANDLE   INVENTORIES 215 

of  transactions  have  been  completed;  after  raw  material  has 
been,  by  the  expenditure  of  labor,  transformed  into  finished 
product  and  that  product  has  been  sold.  In  businesses  where 
the  market  value  of  material  fluctuates  greatly,  however,  the 
speculative  loss  becomes  a  matter  of  importance;  and  once  or 
twice  a  year  should  be  taken  into  consideration  in  the  general 
books  as  an  element  distinct  from,  and  in  addition  to,  manu- 
facturing profit  or  loss. 

Speculative  profits  almost  invariably  should  be  ignored.  Cer- 
tain decisions  which  have  been  handed  down  in  the  courts  make 
it  a  very  questionable  proceeding  for  a  manufacturing  concern 
to  declare  dividends  between  the  cost  and  market  value. 

Inventories  may  be  taken  then:  first,  at  cost;  second,  at  cost 
or  market,  whichever  is  lower. 

It  will  be  seen  that,  if  inventories  are  taken  at  cost,  speculative 
and  manufacturing  profits  or  losses  become  one.  In  other  words, 
the  market  value  of  raw  materials  is  presumed  to  affect  the 
affairs  of  the  concern  only  by  whatever  influence  such  values 
have  upon  the  selling  price  of  the  finished  goods. 

If  inventories  are  valued  at  cost  or  market,  whichever  is  lower, 
the  effect  is  to  ignore  speculative  profit  (permitting  it  to  be 
expressed  in  extra  margins  when  the  goods  are  sold)  and  at 
the  same  time  to  recognize  speculative  loss  in  an  immediate  way. 

Many  bookkeeping  authorities  hold  that  the  second  method 
is  the  proper  one,  and  indeed  it  is,  provided  that  what  is  required 
is  merely  to  determine  the  financial  status  of  a  concern  at  a  given 
time.  When,  however,  the  cost  finding  and  bookkeeping  records 
are  checked  against  each  other  by  means  of  controlling  accounts 
covering  the  value  of  materials  on  hand,  goods  in  process,  finished 
goods  on  hand,  and  so  on,  this  second  method  would  involve 
the  necessity  in  the  cost  department  of  re-pricing  materials, 
re-calculating  the  cost  to  date  on  unfinished  orders  and  readjust- 
ing the  value  of  finished  goods  on  hand.  This  in  many  instances 
would  be  not  only  undesirable  but  clerically  next  to  impossible. 

Inventories,  therefore,  should  be  taken  primarily  at  cost  and 
should  be  carried  in  the  controlling  accounts  at  all  times  at 
cost.  In  case  of  a  falling  market,  inventories  also  should  be 
taken  at  the  market  and  an  account  should  be  opened  in  the 
ledger  covering  this  depreciation.    This  account  may  be  called 


216  STOREKEEPING 


inventory-depreciation  reserve,  or  any  other  appropriate  name. 

In  most  instances,  when  controlling  accounts  are  opened, 
monthly  closings  are  made.  Usually,  however,  it  would  be  found 
a  matter  of  some  difficulty  to  determine  what  proportion  of  the 
depreciation  reserve  could  be  thrown  against  the  profit  or  loss 
monthly.  It  would  ordinarily  be  advisable,  therefore,  to  permit 
this  account  to  stand  on  the  ledger  until  physical  inventories 
again  were  taken.  Adjustments  will  then  be  made  in  view  of 
market  conditions  at  that  time.  Out  of  the  physical  inventory, 
as  this  discussion  suggests,  may  come  not  only  improvements  in 
storekeeping  methods,  but  also  the  correction  of  buying  policies. 
No  concern  is  in  a  position  to  ignore  such  lessons.  Large  specu- 
lative losses  will  be  interpreted  into  overbuying,  overcaution 
against  shortage,  and  unsound  judgment  as  to  the  trend  of  prices. 
If  slightly  different  varieties  of  a  material  or  supply  are  listed 
on  the  inventory  sheet,  the  call  to  standardize  is  plain.  If  the 
figures  for  obsolete  stores  are  mounting,  the  sagacious  manager 
will  organize  a  committee  to  keep  in  touch  with  the  new  things, 
as  well  as  have  shop  and  sales  department  get  together  on  a 
permanent  plan  to  clear  away  obsolescent  items  before  they 
become  relics. 

The  purchasing  agent  is  the  differential  between  the  almost 
unlimited  field  of  supply  and  the  factory's  demand  for  materials, 
supplies,  equipment  and  new  construction.  Neither  demand  nor 
supply  is  ever  still,  and  the  purchasing  agent's  plans,  conse- 
quently, are  always  subject  to  readjustment.  It  is  his  business 
to  improve  upon  himself.  The  physical  inventory,  the  opinion  of 
a  foreman  who  is  watching  the  behavior  of  a  new  material,  and 
the  report  of  an  association  which  has  made  a  study  of  concrete 
mixtures  or  steels  or  enamels,  all  help  him  to  mateh  his  purchases 
more  perfectly  with  the  factory's  needs. 


INDEX 


Abstracts,  in  stockkeeping 

Adulteration 

Alloys,  purchasing  of 

American  Chemical  Society 

American  Railway  and  Maintenance  of 

Way  Association 
American  Society  for  Testing  Materials 

114, 
Annunciator  system 

Associations,  for  buying  on  specifications 
Astle,  Wilfred  G. 


Bane,  Chas.  W.  10 

Berndt,  Irving  A.  10 

Birdseye,  Frank  W.  134 
Black  Diamond  Publishing  Company         10 

Bunnell,  Sterling  H.  10 
BUYING 

— general  remarks  11 

—guiding  policies  11 


Cannon,  N,  10 
Catalog  file,  for  purchasing  department     83 

"  Change-overs,"  how  reduced  180 
CLASSIFICATION 

— Dewey  system  150 

—of  stores  144 

—mnemonic  system  147 

— numerical  system  147 

Coal,  tests  for  111 

Colleges,  use  of  laboratories  117 

Coleman.  H.  W.  184 
COMPETITION 
— increased  through  failure  to  expand     48 

— in  purchasing  40 

Complaints,  reports  on  108 
CONTRACTS 

—in  purchasing  84 

— sliding  scale  88 

— straight  38 

Cooperation  in  purchasing  85,  41 
Cost-plus-a-percentage  basis,  in  purchas- 
ing 
Credit  information,  from 
Cushing,  George  H. 


Dannerth,  Frederic  88 

DELIVERY 
—of  stores  180,  165,  187 

— of  tools  188 

— on  time  schedule  187 

— use  of  pneumatic  tubea  167 

Department  of  the  interior  118 

Depreciation  reserve  416 

Devlin,  Thomas,  Manufacturing 

Company  134 

Dewey    system,    of    classification  150 

Dudley,     Charles    Benjamin  88 


Edison  Storage  Battery  Company 
Estep,  H.  Cole 


Farquhar.  A.  B.  Company  10 
reiker,  F.  M.  gjj,  S4 
Felt  and  Tarrant  Manufacturing  Com- 
pany M 
Fluxmeters  iog 
Forms,  for  purchasings  85 
Franklin  Automobile  Company  184 


Garford  Automobile  Company  88 

General  Electric  Company  184 

Griscom- Russell  Company  io 


Harris,  Ford  W.  io,  184 

Hart-Parr  Company  is* 

Heywood,  Johnson  io 

Hosford,  H.  S.  88 

Hunter,  J.  V.  io 


I 
Indexes,  of  numerical  and  mnemonic  sys- 
tems 
International  Association  for  Testing 

Materials 
International  Congress  of  Applied  Chem- 
istry 
International  Petroleum  Commission 
INVENTORIES 

— blanks  used  for  SOS, 

— depreciation 

— depreciation  reserve 

— dispensing  with 

— filing  devices  and  systems  200, 

— laying  out  territory 

— making  foremen  responsible  for 

— method  of  taking 

— of  bulk  materials 

— perpetual 

— plan  of  organisation 

— preparation  for 

— sorting  and  counting 
specialization 


— systems  in  use 
— tag  scheme  for 
— to  reduce  stock 
— trade  unit  of 
— valuations 
INVOICES 
— check  on 
— register  for 


King,  L.  E. 
Kunta,  Philip  E. 


201,  208,  205,  208, 


INDEX 


LABORATORIES 

— college  117 

— illustrations  of  02 

— tests  not  an  infallible  guide  100 

Leather,  tanning  of  112 

Lockouts,  providing  for,  in  purchasing       31 

Lumber,  testing  of  00 


M 

Magnets,  tests  for 

Marsh,  F.  A. 

Master  Car  Builders'  Association 

Materials,  service  tests  for 

Merit  basis,  in  purchasing 

Metal  frames 

Metal  sashes 

Meyercord  Company 

Miller,  Franklin  and  Company 

Miskella,  W.  J. 

Mnemonic  classification 

Murphy,  Carroll  D. 


105 
10 

114 

103 
00 
12 
12 
10,  134 
10 
10 

147 
88 


N 


National  Bureau  of  Standards  116 

National  Electric  Code  115 

National  Fire  Protection  Association  114,  115 
National  Paint  Manufacturers'  Associa- 
tion 115 
Northway   Motors   and   Manufacturing 

Company  134 

Numerical  classification  147,  140 


—index  of  items  purchased  08 

— in  emergencies  43,  08 
— instances  of  wise  and  unwise  buying    48 

— invoice  register  70 

— knowledge  of  markets  17 

— laboratory  methods  89 

— laboratory  tests  100 

— necessity  for  detailed  knowledge  25 

— of  patented  devices  50 

— of  power  10 

— on  cost:plus-a-percentage  basis  69 

— on  specification  78 

— order  blanks  for  84 
— order  records                                77,  82,  83 

— policy  if  capital  is  small  46 

— posting  clipping  20 
— preventing  collusion  among  suppliers  57 
— providing  for  strikes  and  lockouts         81 

— quotation  record  72 

— record  forma  81 

— records  81  ,61 

— relation  to  sales  80 

— requisition  blanks  70 

— requirements  of  department  84 

— securing  expert  advice  94 

— service  tests  100 

— special  problems  89 

— splitting  iip  orders  24 

— standardization  27,  00 

— strategy  to  increase  competition  53 

— summary  of  requirements  63 

— system  for  handling  details  78 

— testing  09 
—use  of  class  journals  and  trade  papers  24 

— vouchers  for  85 


Orders,  for  purchases 


Paint,  for  concrete  36 
Palmer,  I.  E.  Company  88 
Patented  devices,  purchasing  of  50 
Pencils,  consumption  of  142 
Penton  Publishing  Company  88 
Perpetual  Inventories  209 
Piece  numbers,  in  stockkeeping  171 
Pneumatic  tubes,  for  delivery  of  stores  167 
Porter,  Harry  Franklin                    10,  88,  134 
Prismatic  glass,  for  windows  18 
PURCHASING 
— accounting  for  low  prices  50 
— adjusting  terms  30 
— bulking  orders  59 
— buying  or  making  45 
— buying  source  of  supply  35 
— card  lists  of  suppliers  41 
— charting  market  prices  26 
— checking  invoices  and  receipts  81 
— contracts  S3 
— controlling  requisitions  76 
— cooperation  with  other  departments  41 
— cooperative  35 
— cost  in  relation  to  economy  15 
— danger  of  patronizing  competitors  48 
— danger  of  depending  upon  one  source  60 
— deciding  on  quantity  29 
— deciding  whether  to  buy  or  make  47 
— detecting  adulteration  and  substitu- 
tion 96 
— developing  friendly  relations  60 
— economies  27 
— for  routine  needs  33 
—from  small  shops  18 
— getting  points  from  salesmen  62 
— handling  sales  literature  22 
— how  to  keep  in  touch  with  the  mar- 


QUOTATIONS 

— forms  for  purchasing  department 

— records 

— telephone,  form  for 


Racks,  arrangement  of  151 
RECEIVING 

— checks  on  receipts  70 
— danger  of  negligence  65 
— date  "tickler"  66 
— goods  received  record  blank  89 
— memorandum  blank  67 
— necessity  for  one  inlet  65 
— reports  68 
— routine  methods  65 
Reed,  Chester  R.  134 
Repair  orders,  advantage  of  stores  sys- 
tem 183 
Requisitions  76 
Rockwell,   Thomas  S.                         .    10,   88 
Rogers,  S.  B.  134 
Russell,  H.  A.  88 
Ryerson.  Joseph  T,  and  Son  10,  134 


s 

Sales  literature 

Samples 

Service  tests,  for  new  materials 

Shipping  office,  records 

Sliding  scale 

SPECIFICATIONS 

— advantages 

— based  on  service  tests 

— blanks  for 

— do  not  increase  prices 

— forms  for 

— gathering  information 

— indexing  information 


22 
126 
103 
69 
S3 

129 
125 
173 
129 
121 
120 
124 


—in  purchasing  94 

— kind  of  information  needed  124 

— provisional  UO 

— provision  for  inspection  120 

—purposes  120 

— recording  data  123 

— requisites  HO 

— routine  122 

— rules  for  framing  120 

— standardization  of  125 

STANDARDS 

— experiment  stations  for  117 
—getting  information  from  customers 

in  regard  to  107 

— tests  for  H7 
— trade  association,  aid  in  establishing    115 

Stock,  requisitions  for  140 

STOCKKEEPING 

— abstracts  178 

— accounting    methods  185 
— blanks  used  in      155,  175,  189,  191,  195 

— by  departments  186 

— determining  minimums  175 

— checking  deliveries  191 

— classifications  192 

— duties  of  stock  clerk  193 

— foreman's  reports  195 

— forms  used  130 
— maintaining  balance  between  orders 

and  supplies  102 

— orders  for  special  tools  100 

— piece  numbers  171 

— preparing  for  fluctuations  177 
— preventing  surplus  and  shortages 

179,  196 

— records  used  in  185 

— system  for  checking  leaks  194 

— use  of  color  scheme  188 

STOREROOMS 

—arrangement  of  145,  146,  169,  164,  181 

— location  of  154,  168 

— minimum  of  investment  in  156 

— portable  158 

— special  156 

— subdivision  of  158 
STORES 

— arrangement  of  bins  and  racks  138,  151 

— cash-control  idea  141 

— classification  of  144 

— delivery  methods  182 
— importance  of  system  for  controlling    135 

— distribution  of  160 

— indexing  and  filing  system  for  133 


INDEX 


— inventories  of  140 

— office  hours  for  issuing  of  188 

—overhead  carrier  system  for  158 

—planning  ahead  for  delivery  of  165 
— savings  effected  through  control  of     136 

—shortages  i38 

— source  of  loss  135 

— standards  of  consumption  141 

— stockkeeping  methods  171 

—standards  of  quality  143 

— system  of  classification  of  147 

—system  for  small  plants  137 

strikes,  providing  for,  in  purchasing  81 

Swinton,  D.  R.  \q 


Technical  schools,  research  work  and  teats 

made  by  117 

TESTING  " 

— illustrations  of  equipment  for  109,  110 

1*7,  128 

— of  raw  materials  28 

— record  blank  for  93.  05 

TESTS 

— for  coal  Ml 

— for  oil  104 

— for  magnets  105 

—for  prevention  of  waste  101,  103 

— for  steel  105 

— for  varnish  10* 

— value  for  expert  opinion  108 

Thermal  units  m 

Tickler,  for  receiving  departments  06 

Trucks,  for  delivery  of  stores  167 

Tuthill  Spring  Company  10 


Valuations,  methods  214 

Varnish,  tests  for  104 

Velie  Motor  Vehicle  Company  10 

Vouchers,  in  purchasing  85 

w 

West,  Louis  C.  1S4 

Whitney  Manufacturing  Company  134 

Wilcox,  H.  M.  10 
Wiley,  J.  W.                                               10.  1S4 

Willys-Overland  Company  184 
WINDOWS 

— metal  frames  and  sashes  for  IS 

— ribbed  glass  for  12 

Wood.  Henry  M.  184 


mmm 

A     000  503  307  7 


SOUTHER.  M    BRANCH 

UNIVERSITY-.      CALIFORNIA 
LIBRARY 

LOS  ANGELES.  CALIF. 


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